Look for assumable financing
If you’re a buyer or broker, focus on finding deals where assumable financing that provide an acceptable amount of leverage.
Owing to the relatively frozen credit markets, a full one-half of all investment sales in 2008 involved assuming in-place financing. The buyers and brokers that successfully concluded transactions last year sought out those transactions to market or acquire.
The few 1031 exchange buyers out there will need to replace the debt and equity components of their trade. These buyers in particular benefit from assuming attractive in-place financing.
The many CMBS (conduit) loans that were originated up until 2008 were typically non-recourse. That sort of non-recourse debt is difficult to find today. The life companies that originate this sort of debt have their choice of many deals — and there is much more demand for this sort of debt than there is supply.
2009 shows no sign of significant thawing of the debt markets. The level of distress is increasing dramatically. As a good portion of sales that conclude successfully in 2009 will involve assumable debt.
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