REIN Finance Centre Mortgage Update: Commercial Real Estate

Stephen+Thomas+TrimmedResidential lending rules have changed and are causing challenges for real estate investors. If you’re working with a company like Disrupt Equity then any changes that get made will be easier for you to get through because you’re with professionals. However, if you’re independent then changes like these can be troublesome for you. According to VINE Group and REIN Finance Centre Director of Commercial Credit Stephen Thomas, commercial real estate is an option that investors can look at to get back in the game and add to their portfolio.

Many Canadians are having a hard time getting financing on their mortgages, whether they are first-time home buyers or investors trying to buy additional properties. The rules are targeted to make mortgage qualification more difficult, but while the changes were intended to be focused on Vancouver and Toronto, they are affecting ALL areas of Canada. Qualifying for a mortgage takes a lot more work now and investors have to provide more paperwork.

Commercial real estate includes multi-family spaces and even light industrial and office buildings. This is the direction many people are going because financing is generally easier to get now that new rules have been implemented. It is also easy to find some great commercial real estate insurance rates as well which help to keep costs down. Stephen has seen a lot of very experienced investors leveraging commercial financing as a tool to start investing in residential real estate again. If you have historically been a residential investor and have been locked out of the marketplace because of the new rules, you have options to continue residential investing on the commercial platform.

What Investors Need to Know About the Commercial Real Estate Application Process

Stephen says a lot of clients get intimidated by the commercial mortgage application process, but with the amount of regulations on the residential side, the gap has been closing and is pretty similar in most regards. The major difference is that third party due diligence reports are much greater and more in depth, so a commercial appraisal in comparison to a residential can be much longer. The biggest hurdle is getting accustomed to the enhanced due diligence on the commercial front, whereas residential is much more “cookie cutter” – either you qualify or you don’t.

On the positive side, since commercial is not as black and white as residential, there are a lot of gray areas you can use to mitigate and qualify for a deal that does not technically fit inside a lender’s box.

While this may be a good option for you, there are key steps you MUST take to succeed in commercial real estate and factors you need to be aware of. Patrick Francey’s full interview with Stephen is available in REIN Member Back Office. REIN Members have exclusive access to industry leaders, webinars, analytics, reports and more.

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