Life Companies – The Best CRE Loans You Never Heard Of

Banks can be a great source for loans on your home, car and business, but they can be FAR from your BEST option for commercial real estate.  That’s why Rhenium Capital is here to shed some light on the best CRE loans you never heard of: Life Co Loans.

Many CRE investors simply aren’t aware that life insurance companies, or “Life Cos”, make great commercial real estate loans.  They’re even less aware that Life Cos often offer terms and rates that beat the banks, along with a ton of other perks that your bank just can’t provide.  Don’t beat yourself up over not looking into this sooner, because unlike your bank, you can’t just walk into a Life Co office for your free loan quote… or your free toaster!

So the next time your bank says “NO” because you maxed out your borrowing limit, your deal is out of their region, or when you finally realize just how STUPID it is to finance a 15 or 20 year NNN or CTL deal with a 5 or 10 year full recourse bank loan, know that BETTER CRE FINANCE OPTIONS await you!

Here are 4 key advantages that Life Co loans have over your bank:

#1 – FLEXIBILITY – Life Co’s are looking to hold your loan for the long term.  As such, they are not limited to the standard 5 (and occasional 10) year loans offered by your bank.  If you have a 20 year lease term on your new 1031 exchange investment, a Life Co will be happy to close a 20 year loan that’s coterminous with your lease.  This is handy if you are buying a NNN or CTL investment, you want to lock in today’s (still) historically low rates, and are smart enough to avoid getting hammered when you try to refinance that bank loan in 5-10 years!

Flexibility also includes prepayment flexibility; as in something other than your bank’s standard Yield Maintenance clause if you want the option to pay off the loan early. Plus Life Co loans may offer interest only terms and are assumable if you are looking to sell your asset prior to loan maturity.

#2 – NON-RECOURSE – You can find a great explanation HERE, however to summarize: banks require you to pledge not only your investment property as collateral, but also your other business and personal assets (car, home, 1^st born, pets, etc.)  Non-recourse finance only requires that you pledge the investment as collateral.

In short, non-recourse loans are the tool the largest REITs, funds and institutions in the world use to grow their investment portfolios, and they are available to YOU as well.  Feeling empowered yet?

#3 – COMPETITIVE TERMS – On top of being more flexible than your average bank AND non-recourse, Life Co loans offer interest rates in-line, and often better than banks!  If you are looking for a “balloon” loan structure, you can get up to 30 years of amortization.  Although Life Cos often max out at 65% loan-to-value, they can easily stretch to 75% LTV for high-demand assets, like top markets/locations, credit tenants, multifamily, and they don’t frown on cash-out refinancing like banks typically do!

#4 – BORROWER FRIENDLY – It is often the small details that make a big difference!  Life Cos are not holding your deposits, but they certainly want good borrowers to bring them great deals to finance in the future.  There are just some things that Life Cos do better than banks:

• They quote deals quickly – Life Cos work through 3^rd parties to vet out deals that fit their programs, so they offer fast turnaround on initial loan terms, which are generally spot on with how your final loan commitment will read.
• Rate lock at application – once they have received your signed application and initial deposit (typically ½% to 1% of the loan amount), they will lock your rate for 60 to 75 days. As rates continue to edge up daily, this is an excellent standard feature to offer.
• Reasonable closing costs – Life Cos have the discretion to waive certain requirements for the closing that the borrower would typically pay for.
• In-house servicing – Have you needed to speak with your lender only to end up speaking with some random customer service rep on the other side of the planet? When we say that Life Cos want to hold your loan for the long term, we actually mean that THEY WANT TO SERVICE IT FOR THE LIFE OF THE LOAN.

Sounds great right?  Only problem is Life Cos are NOT direct originators.  Instead they work through 3^rd parties (like Rhenium Capital) to source their deals.  If you’d like to learn more about Life Co loans or would like to receive a Life Co quote, we’re here to help!