Due to interest rates being so low, many Mssouri investors are branching out and looking for new ways to make a solid return through a fixed-income investment. One option is to purchase debt associated with commercial real estate with the help of an online lender.
The option to invest in this secured debt has widened in recent years due to online lending platforms. Previously, investors were locked out of these opportunities other than purchasing shares of mortgage REITs. Having online lenders provides investors with greater access to fixed-income commercial mortgages which often provide higher yields. Since the debt is secured, the lien has priority over any other debt of the borrower that is associated with the building until the underlying loan is paid in full. If the borrower happens to default, the lender can often recoup the investor’s money.
Before agreeing to a transaction with an online lender regarding commercial property, the lender’s track record and current portfolio should be reviewed. This due diligence can help reveal whether the platform is suited to the investor’s needs. This assessment can be completed by carefully evaluating how the lender utilizes technology, how well the lender knows the commercial market, whether the lender uses traditional methods that are still effective rather than solely relying on technology and the types of opportunities that the lender offers.
Even thought it is secured by liens on the underlying properties, investing in commercial real estate mortgages is not free from risk. An attorney who has experience with these matters can assist a client who is interested in this type of opportunity by reviewing the particular loan documents and obtaining a current appraisal of the subject properties in order to see how much cushion there is in the event of a default by a borrower.