Residential Investment

One of the toughest markets in which to get financing today is on residential investment properties. Few lenders are looking at funding residential on an investment basis due to the continual fall in residential real estate values. However, at CLX we have a number of lenders who will take on the risk associated with residential investment properties.

a) Traditional Banks – we have a number of traditional banks that will look at providing residential investment property financing. Typically the Banks are not willing to lend more than 75% of value, and in some cases even less than that, and are providing terms of three to five-years. Interest rate are typically in the upper 5% to 6% range, and sometimes even higher than that depending on the Bank and the perceived risk of the transaction. Traditional Banks spend a lot of time underwriting a Borrower’s entire portfolio (even those properties not financed by the Bank), and that entire portfolio typically must meet the underwriting guidelines of the Bank. We often work with Borrowers on the front-end to position their existing properties to put them in the best light so that we can get approval for a refinance or new financing for additional property acquisitions.

b) Specialty Lending Programs – there are a number of specialty lending programs in the market specifically targeting residential investment property financing, and we work with a number of them. These programs vary widely in what they offer, but typical advance rates are between 65% and 75% of acquisition cost. Some programs will offer cash-out up to a certain level, while others will offer capital to improve properties after acquisition based on the projected “As-Completed” or “As-Stabilized” value. Interest rates on such programs tend to be between 8% and 12% with loan fees usually between 2% and 6% of the loan amount.

c) Private Equity Lenders – there are a number of private equity lenders that will fund residential investment properties. The majority of those lenders are looking for relatively safe transactions with loan to values of 65% or less. Some will offer cash-out, but usually at a loan to value below 65%. Some programs are short-term and on a interest only basis, while other programs are longer-term and will provide for either interest only or amortizing loan payments, with typical amortizations twenty-five years. Interest rates are typically in the 8% to 16% range with loan fees of 2% to 6%.