Will brokers follow the investors?

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In the face of increasing wait times for loan approvals and fearful of missing out on big deals, more investors are switching to the commercial side, opening up an opportunity for brokers to follow.
 
As lenders sit on finance applications for longer, frustrated landlords are taking more proactive steps to avoid missing out on opportunities.
 
“Many investors have been finding that the approval process is slower and so it’s a case of having to do something now,” Richard Danby, investor and owner of Rich Ottawa Investments told MortgageBrokerNews.ca’s sister publication, Canadian Real Estate Wealth. “Many are moving to the commercial lending side as it can often be easier to get finance.  Obviously, every case is different but that is what we are seeing on the ground.”
 
Michael Dominguez, investor and Realtor from Durham, says sourcing finance for joint-venture deals is proving troublesome for many landlords, with lenders looking for an increasing amount of information and figures.
 
“Investors have to really work on the deal structure to ensure they get that finance,” he said. “And even the shortest of delays can lose a deal, especially when you are buying properties like multi-family buildings.”
 
Many investors have complained that the approval process has worsened during the summer months.
 
“Such delays can really create a stressful situation for all members of your investment team,” said Danby, adding that lenders seem to be exercising more caution when considering residential investments.
 
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  • Ron Butler on 2014-07-22 12:50:45 PM

    So let me think about this for a second.

    Financial institutions are growing more concerned and cautious about approving development and construction financing for condo developments and other types of multi-res properties so it provides a great opportunity for individual investors to jump in and fund these mortgages for fat interest rates like 8.00% to 11.00%.

    Actually I think if banks are afraid of these particular development deals then individuals should be terrified.

    If investors can lend on first mortgages today on plain vanilla single family homes with LTVs of 80% or less using conservative appraisers and yield 10% return why would any mortgage broker EVER recommend investment in exotic mortgages for development and construction of multi-res and commercial properties?

    It makes no sense to me at all.

  • Glenn May-Anderson on 2014-07-23 10:50:05 AM

    Hey Ron. Above, it says that "lenders seem to be exercising more caution when considering residential investments." Nowhere in the article does it mention development financing.

    In the original article, it is clearer: http://www.canadianrealestatemagazine.ca/news/item/2096-lenders-stalling-investor-plans

    They are referring to the fact that, when underwriting multi-unit residential buildings for purchase or refinance, lenders are being more cautious. Combined factors are the dramatic increase in individuals attempting to buy rental properties (an extension of the increase in demand for rentals in major markets across the country), and the recent underwriting changes and regulatory changes in the industry. Prudence on the part of the lenders, but it means more and more landlords are having to seek private mortgage financing in order to close multi-res purchases or refinance them. The investors in question are property investors, not mortgage investors.

    Development financing continues to be a commercial investment underwritten by teams at the major lenders that specialize in that kind of financing; they have always been cautious and performed high levels of due-diligence. It would seem those practices are trickling down to other areas within these same lenders.

    To your point on development financing, it is extremely important for any development mortgage that an individual considers investing in be with a bankable developer, and that the overall development is bankable (as in, will receive bank financing). It's a major consideration before we will even consider putting a project on the shelf.

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