Nov 23 2020by John Matheson

The Impact Of COVID-19 On Investment Property Financing

It seems like the landscape of investment property is moving daily.

As investors or developers during this time, you may feel panicked or petrified to make a move. Maybe it's refinancing a multifamily property or something as simple as hiring an appraiser. We're all just very unsure of what to do or how to go about things.

Like any recession or tough time in society, Lenders will resurface and start accepting in large amounts again. But, as you probably know, lenders will want to see a more capable performance than they would a month ago.

During COVID-19, we have to reevaluate our investments. For property, it comes down to what you own. Is your property in a situation where it cash flows? Is it unique enough to finance right now or would you have to wait for traditional financing? Whichever scenario you happen to be in, here's how COVID-19 is impacting the financing market for an investment property.

Unpredictability of Lenders & Information Overload

Right now, it's not outrageous for lenders to take a more defensive posture when it comes to financing. After all, we are all trying to figure out how to work our way through current economic conditions. If we understand how lenders work to originate loans in the first place, it may be easier to understand. Find out how the loan origination process works here .

We need to be able to speak the same language. Lenders are lending on properties today, but it is a different world. We don't want to be unprepared and on the sidelines. Once things open back up again, wouldn't you rather be first in line than last? As you may know, when lenders get overloaded, processing times extend and extension of time can wreak havoc. Who wants to wait?

Current Government Programs

The SBA is currently dealing with a lot of transaction flow, incrementally a hundred times more than what they have ever processed in a year, especially with things like the Payroll Protection Program. Lobbying groups are trying to get the next lift of capital opened up for people who pay property managers to run sites.

But, even in the smaller space, it's challenging to get that kind of money as a property owner. There is so much information out there right now. For those that are developers or multifamily investors, there are talks to open up the next lift of capital and perhaps it's coming your way!

Refinancing Old Investment Property

When you have assets, anything that can get financing will allow us to maybe cover payments for a while and we can build in an interest reserve for 6 to 12 months. Non-bank lenders will talk to you about what assets they think will hold up through all of this as we start to return to normal.

Do you have a property or business asset to refinance? It may help you immensely, in the long run, to start the financing process right now. As a property investor, all we can do is intake the current information that we get and then project where we'll be in a month. If we think our finances will be in a different, more favorable place, we need to act today, especially when it comes to financing.

Financing Newly Acquired Property

What if you want to buy a new property during COVID-19? Perhaps you already had a transaction in the pipeline and then out of nowhere, things like LTV and occupancy rate change at the lender level.

You can. It comes down to what you qualify for. Many property investors apply for things like a business line of credit to do something like redoing a parking lot or fixing up the outside of a building, maybe landscaping. It's times like this where technology can really help in the pre-qualification process, especially when it has the ability to tell you whether a transaction is financeable in as little as ten minutes. One of those technologies is Leverage, check it out here.

On the other hand, Investors can also speak to private lenders. Private lenders are people that are always looking for a return — especially when it comes to assets like property.

The impact of COVID-19 on property investing has been substantial, but that doesn't mean the process should stop.