Investing in Real Estate
Most hard working individuals and families are actively looking for investment opportunities that allow them to receive income and a return of their principal. Investments in commercial real estate have historically been a good way to accomplish both goals and First Bank of the Palm Beaches can assist in the process.
Income Producing Commercial Real Estate Changes due to the Great Recession
The process of buying real estate to provide income while preparing for retirement has certainly changed due to the great recession. Before the financial crisis, most banks would analyze the property to be purchased and the income that it produces on its own in conjunction with the borrower’s individual income and credit. As long as a borrower had an adequate down payment and had enough cash flow to support the debt, the loan would typically be made.
However, during the recession, many borrowers saw decreased cash flows from properties as vacancies sky rocketed. Properties were also not easily salable as real estate values declined substantially. Therefore, if a borrower had four or five income producing properties and did not maintain a healthy stock pile of cash, all of the properties were soon in jeopardy of going into foreclosure.
So you will now see most banks analyze all of the borrower’s real estate obligations together (global cash flow) with the individual property to be analyzed. Bank’s now pay much closer attention to debt to income ratios for commercial borrowers than before and also require borrowers to maintain more significant cash positions.
These tighter commercial real estate investment guidelines are not a bad thing. Again, these investments are typically made to return principal and realize an income stream. First Bank of the Palm Beaches wants to help you finance your real estate investments while discussing the risks in order to help you secure your financial future.
First Bank of the Palm Beaches wants to help you invest in real estate but with the caution that will allow us and our customers to avoid the mistakes of over investing. As long as borrowers have an appropriate down payment and are not over levered, First Bank will be happy to provide commercial real estate loans.
Banking with First Bank
Again, because of the global nature of many of the problems of the past, First Bank will typically only make commercial investment loans to customers that we have a core banking relationship with. Even if an individual commercial investment is “perfect”, past experience has shown that a borrower can experience financial stress quickly if other investments start to exert negative pressure. The more First Bank understands your core banking business, the better suited we are to making your investment loan.