2012 saw a 68% increase in new commercial investment property loan production from commercial banks, compared to 2011. This is according to a recent study by the Mortgage Bankers Association. This figure does not include multifamily loans, but rather commercial properties such as retail, office, industrial, etc.
Traditional banks have been very reluctant to lend on investment properties since the Great Recession began, for a variety of reasons. CRE lending and especially so for loans less than $4,000,000 have had limited loan options/programs to pick from. For larger loans, Life Companies have been in the position to “cherry pick” the best loans.
Though investment property loan production from banks, is up considerably, underwriting remains conservative. For example, the vast majority of banks cap their loan to values at 65% with minimum DSCR at 1.35.
Rates however remain great. Low to mid 4%’s are available for most property types, with 20 and 25 year amortization schedules and fixed rates from 3 to 10 years.
Hopefully, the increased lending trend will continue, creating more competition and thus more aggressive underwriting.