This week we have examined the long term result associated with economic collapse in nations like Argentina and Greece as well as short term indicators of continued instability here at home. Domestic and international real estate has proven to be a solid long term investment for those seeking protection, profit and potential refuge during tough economic times. Today we will take a look at a rather elusive, but important, type of loan.
Mezzanine loans are a special type of loan secured by stocks or other ownership in a company. Once used to purchase commercial and other forms of real estate...or as a stand-alone investment...they all but withered away after the recent real estate bust. Today they are beginning to resurface due to increased interest and demand.
Mezzanine loans function much like a second mortgage since they play "second fiddle" to the primary mortgage. However, unlike most second mortgages which have been wiped out during defaults, Mezzanine loans use stocks, bonds or even other property as collateral rather than the underlying real estate making them an attractive alternative to lenders and prospective investors alike.
What does this mean for short sale investors? Simple. Banks and other lenders are increasingly likely to underwrite a second loan in exchange for valuable assets outside of the primary real estate. Private lenders and others benefit by the additional security of the primary asset as well as the collateral provided by the stocks, bonds or other assets used to secure the loan plus higher than average rates of return outside of the traditional banking or bond agencies.
Borrowers benefit by being able to finance a greater segment of the down payment or other costs including the desire to maximize liquidity when purchasing commercial short sale real estate or other investments.. It's a win-win situation for all involved.
Savvy short sale investors seeking new ways to enter the commercial market or increase their holdings should examine the feasibility of mezzanine loans. It's just one more tool to keep in mind when evaluating the total performance of your portfolio.
http://www.theurltool.com/?8156
See you at the top!
Martin Crawford
No comments:
Post a Comment