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#8 Location, Location, Location

Number eight on the list the property is in an undesirable location

We have all heard the old adage, Location, Location, Location. If the property is in a desirable location it only makes the lender more comfortable. But we are aware that properties that are not in good locations can still be financed.

The key to location is that the property must fit in with the surrounding environment. For example an industrial building even though it is beautifully maintained in a purely residential area would be hard to finance even if it was built under the proper zoning. The reason is that the property would be downgraded by an appraiser for not “fitting in”.

While on the other hand a “C” property surrounded by all “C” properties would be more likely to be financed. The lenders would not have that much of a difficult time re-selling the property in the event of a foreclosure or a default by the borrower. The key is does the property fit in to the environment, if it does it will be easier to finance?

But there is another more unknown issue of undesirable location rather than just where the property is located. That of where the borrower is located in relationship to where the property is located. A local borrower with a local property can be much easier financed than a local borrower with an out of area property. The lenders want to know that the borrower can visit his property regularly, to keep an eye on the property to make sure that it is well maintained etc. If the borrower is so far from the situs of his property lenders are concerned that the borrower is not going to know exactly what is going on in the property.

For example, we had a client that was very strong, but he was buying a property n Oklahoma, while living in San Diego. I could not find one lender that would entertain this transaction. It was all due to the fact that the borrower was too far geographically from the property.

For more on location and types of properties buy our book GET Your Loan Closed!, now with FREE Commercial Loan Training.

February 22nd, 2010 in General Commercial Finance

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