The commercial real estate market in Dallas is robust due to the city’s growing population, the expansion of numerous industries into the area, and significant job growth. As a result, commercial vacancies are low, property values are high, and more commercial development is in the pipeline.
Also, interest rates remain low, as LIBOR and the U.S. 10-Year Treasury rates are at around 1.50% and 2.50% respectively. These factors, point to a perfect storm for increased commercial real estate investment and lending activity in Dallas.
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Speed is key in a high demand market like Dallas
In a market with high demand, such as Dallas, the cost of missing opportunities is significant, so it is crucial to line up financing quickly and efficiently. CMBS, balance sheet, and other conventional loans can take months to close due to the extended underwriting and due diligence process. A private hard money bridge loan, however, which can close in as little as two weeks, can enable a borrower to get the funds necessary to secure an acquisition or provide more time to stabilize a property in preparation for a conventional refinance.
Typically, a property’s historic and projected cash flow is the key factor in the underwriting of a conventional commercial mortgage. However, historical cash flows and future projections can be misleading. Changes in demand can drive up a property’s cash flow and value and conventional borrowers cannot take advantage of this. Private bridge lending, which is based on the value of the property (not historical cash flow) is ideal for borrowers in hot markets such as Dallas.
A real estate investor can generate a comparative advantage because of the speed and ease of a private bridge financing. Since the market in Dallas supports high property values, a borrower can rely on the asset-based underwriting process of private lenders like iBorrow.
The borrower doesn’t have to wait for the completion of a months-long, byzantine underwriting and due diligence process that might not provide a favorable result. Furthermore, since the emphasis is on the asset and not the borrower, the finances, credit and personal guarantee of the key principals are not the main focus of the underwriting and due diligence process at private lenders like iBorrow. This is another mitigating factor that makes the private hard money bridge loan underwriting and due diligence process more appealing to a borrower.
In the Dallas market, where competition for property is high, having access to the necessary amount of equity capital is vital. After all, both the equity and debt components of the capital stack need to be in place to close on a deal. It is evident that a real estate investor will benefit from securing quick and easy private financing for an acquisition, refinance, bridge, or cash-out loan on commercial properties in the Dallas market.