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Opportunity in Commercial Mortgages for Office Properties

According to a recent report in Scotsman Guide, the nation’s office market has maintained steady growth and is expected to continue to do so.

Rents have risen 0.5% in the first quarter of 2017, which is the same average quarterly growth rate as in the previous year. The article also states that office-employment growth remains consistent as well, rising 0.5% in the first quarter of 2017 and 2% on a year-over-year basis since this past May.

“Indeed, companies have leased far fewer square feet per employee than they have in previous expansions, but office leasing has been steady relative to job growth,” according to the article. “One also could argue that this current pace is healthier and less likely to lead to a major correction like the one seen in 2008-2010 following the overexuberant leasing of 2005-2008.”

With consistency in this sector of the market, brokers would do well to consider taking on clients looking to finance their office properties.

Here’s some basic information you should provide your lender when presenting the deal:

Owner-occupied or investment:

In addition to the location and size of the property, as well as how long the borrower has owned the building, brokers should know whether their borrower occupies the office space or if they lease it out. Either way, your lender will need to know what type of business operates from the office, but if your borrower has tenants, you need to provide the lender with that information as well as a rent roll.

Credit history:

As it’s an important tool, make sure that you provide your lender with your borrower’s up-to-date credit report, complete with tradelines and score. Be prepared to discuss your borrower’s financial history with the lender.

Use of proceeds:

In order to determine whether a deal makes sense, you need to explain how your borrower plans to use the money. Whether it’s paying off a mortgage, cash out for working capital or property improvements, be sure to detail the use of funds in your loan submission summary.

Capacity to pay:

Your borrower’s ability to make their payments is crucial to a lender. Provide all relevant financial information that proves the borrower will be able to repay the loan.

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