Once again, the lending community has thrown us for a loop. Just when I thought we had it figured out, the lenders have gotten tougher and tougher. We were presented with a loan just the other day, that cash flowed, management had experience with smaller properties, and the money was sitting in a 1031 exchange.
You would think, that this would be an easy loan. What I did not share with you is that the property is located outside of California. The reason the investors were purchasing outside of California was that they can get a much more aggressive CAP Rate. The more aggressive Rate translates to better income return on investment for the client.
The lender turned down the loan, because the population of where the investment property was located was not great enough. This is the same loan that I talked about the other night, which had an occupancy of over 95%. So even though the property was fully, almost fully leased out, unbelievably, the lender still turned down the property.
The lesson to learn here for you and your clients is that you must take painstaking investigation of not only your property, but now you must be aware of all the demographics that may affect your property. Lenders are getting stricter and stricter about where they want to put their money. So the best advice I can offer you is be very aware of all of the aspects while selecting an investment piece of property for your clients.We have not given up on this loan by any stretch of the imagination, but now we have to take a different track, as we talk directly to banks that are neighboring the property. If we're unable to get a local bank to be excited about this deal, then probably this is not the right property for our client.
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