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Investment Property

For many individuals, real estate has become an important part of their overall investment portfolio. In Tennessee, residential values in certain areas have produced sharp gains in value while commercial properties, in the right location, have produced steady returns. With regard to non-owner occupied real estate, several factors are critical in the preservation of value and producing desired returns in an investor's portfolio.

Location. Location. Location. This is unquestionably the most critical factor when examining real estate for residential investment property or commercial property. Whether you are leasing the property to a third party or have plans to sell the property, location is typically the most important factor in marketability.

Pinnacle is actively involved in the financing of commercial property and residential investment properties. For investment property financing, a loan-to-value ratio normally in the 75 percent to 80 percent range is utilized, requiring a cash equity infusion of 20 percent to 25 percent from the investor. For commercial property, the existence of a lease of five years or more from a quality tenant will be a strong preference, if not requirement.

Because real estate has little liquidity, buyers of investment property need to have a consistent source of income that could be used to support the loan's debt service requirement. In addition, the borrower should possess sufficient liquidity through cash or marketable securities to provide financial protection in the event of a declining market.

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