We continue our discussion with Isaac Grant, and right now we’re going to discuss first timers versus seasoned investors.
Bob Nelson, Eugene real estate investment broker
Isaac Grant, Eugene commercial loan officer
Bob Nelson: Joining me today is Isaac Grant. Isaac is my favorite commercial loan officer. If I’ve got an income property that I’m looking to finance or refinance, I go to Isaac first. Isaac pays a lot of attention and knows what’s happening in the market. Isaac is with Oregon Community Credit Union. Isaac, thanks for joining me today.
Isaac Grant: Thanks, Bob. Great to be here.
Bob Nelson: Let’s go into the topic that we dealt with kind of yesterday and the last several shows. What happens as we see an investor, maybe a first-time investor, getting involved with income properties versus a seasoned investor who’s been doing it for quite a period of time, has built up a pretty strong net worth and real estate. Is there a difference, as you see it, between those two in what they’re doing and how they’re doing it?
Isaac Grant: Absolutely. Bob. If we have a seasoned investor and we’ve seen that they’ve maybe made it through a few economic downturns and they’ve come out the other side, we can see that they have long-term planning in mind. They’re looking at all of their different income streams, like we were talking about yesterday, leveraging certain properties.
Maybe they understand it’s maybe lower risk to have more leverage on a certain property when they look at the debt service, they look at the net operating income that’s being generated by that property. Then maybe they have lower leverage on maybe a higher risk property or a property that has shorter term leases. I think that’s something, especially in the current market.
Isaac Grant: People are very wary of, we were talking yesterday about maybe 10-year balloons, but for certain properties, if you’re looking at buying a property and all of the leases for that property, commercial property, I’m talking about here, not multifamily where the leases are much shorter, but if you have a retail property or an office property and all of those leases come due in the next two to three years, it’s going to be hard to find a lender that’s going to give you a 10-year loan without those tenants maybe extending those leases or signing new leases that’ll extend at least through that five-year period to maybe get a five-year term loan.
Bob Nelson: Now I’ve been in a situation where the lender took exactly that position saying, “Hey, if you want a longterm loan, you’ve got to renew these leases.” If you go to a tenant and try to renew the thing early, they’re going to ask for some concessions and that could be just a little on the brutal side, because they’re going to ask most likely for a reduction, not an increase. It’s an interesting world right now and you need to be dealing with people with expertise that understand it. Isaac, would you join me again tomorrow?
Isaac Grant: Yes, sir.
Bob Nelson: Outstanding.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30pm on KPNW for the “Real Estate Today” radio show.