subject: Loan Philosophy: The Difference Between Lenders and Investors [print this page] Loan Philosophy: The Difference Between Lenders and Investors
As a mortgage broker, I have the pleasure of a whole series of potential loan losses. I did not work out the word "potential" because all of them. In fact, there are a number of turkeys in the swans!
A common scenario is a refinancing or sale, if the investor comes to me with something like, "Man, this is the best property in the area, it is worth $ 5 million U.S. dollars, and I'll buy it for $ 3 million! I need a 90% credit and I need it NOW! "OK so that I have exaggerated just a bit. In reality, the value of the property will probably just for the market, but I'm still the application to the high loan to value.
Until recently, I was probably not have a 90% loan on a commercial property, except in the case of a received Small Business Administration guaranteed loan acquisition. First, because no one offered a 90% loan on commercial property and second, because the ownership of thenot likely to support service the debt have.
The big change in this scenario, the introduction of the "small balance commercial lender in the last few years. The mixture of commercial and private technical methods to obtain higher LTVs. I save an article about this type of lender for later, because I want to On the reason why a conventional commercial lenders do not really care how big of a deal, the investor is always concentrated in a particular property. It is because ita very fundamental difference in philosophy between the lender and investor.
An investor is concerned with maximizing the return on equity. Whether through the multiplier effect, adding value by improving or adding value through the improvement of a property cash flow is the goal of making as much money for participation as possible. The return he gets is the risk he takes with its equity investment in a reasonable
A lender is concerned with something quite different: Getting Startedrepaid! Approaches a lender of a loan as an "investment" as well. In fact, in the lending business, we often call our lenders 'investors'. But to raise these investors and their investments from the perspective of the administration respond to their risk to an acceptable rate of return: The reference rate for the loan. The property that the investor views of this growing asset class of the traditional lender views it as a guarantee for the loan. ( Again, I am not talking about private lenderswhich may have other motivations).
So if you hear an investor say something like, "I do not understand why they do not give me the loan! The property is worth, and they can always take it back if I do not pay!" Well, the reality is that lenders do not want the property back they just want their money back as agreed.
