HOTEL MORTGAGES

Hotel mortgages are no more exempt from the current economic crisis than any other part of the business world. However, government intervention in the economic meltdown could mean that opportunity is about to come knocking even in the hotel mortgage industry. There are some hotel investment experts who feel that the hotel mortgage sector has already seen its worst days. Just as in any other sector of the market these days, bad deals will not fly and good deals will continue to get done. Debt is harder to obtain, and the hotel mortgage industry is still absorbing the blow from July of last year when people stopped doing commercial mortgage-back securities. The 800 pound gorilla in the room is liquidity – or the lack of it.

Talking about the economic situation and what opportunities might exist in the hotel mortgage industry, we can look at the failure of Lehman Brothers. The firm had about $60 billion in real estate holdings and a lot of people felt that there may be opportunities here. Equity investors had pulled out of the hotel mortgage market and put their projects on the shelf while waiting for an opportunistic situation. Since Lehman had about $60 billion dollars in real estate holdings, it could well mean that the time is ripe for hotel mortgages to proceed. Analysts believe that Barclays – who purchased Lehman Brothers – may be in no hurry to liquidate. They seem to have two avenues – to wait it out and let the value return or get rid of all hotel mortgages regardless of asset quality or sponsorship quality.

So, that is the financial climate that those who seek hotel mortgages find themselves in today. Remember, to be successful, you have to know your surroundings. Out of all this gloomy news, there is a silver lining. There are deals to be made in the hotel mortgage industry. When you go down the numbers, commercial real estate defaults still remain at 0.3% to 0.43%, which is a very small number. Compare that to the numbers in the residential real estate market. Equity investors feel the time is now to find those hotel mortgage deals. The slow market is providing opportunities for developers and buyers of hotel mortgages who have capital and can seek out good deals.

Smart money now is buying hotel mortgages if they can find sellers that have adjusted the pricing to reflect the current situation. Smart investors are seeking hotel mortgages now because they want to be opening us as we come out of a recession. It is still possible to get 70% financing on hotel mortgages below $30 million dollars. Those at $100 million dollars and above are requiring more equity.

When you decide that a hotel mortgage is right for you, it is important to know how to obtain that mortgage. A good idea is to get a mortgage broker. A mortgage broker advises you on the loans available from a wide variety of lending sources. They are not paid by any one company to push their particular deals. As an investor seeking a hotel mortgage, you are a unique customer. Mortgage brokers get paid to solve problems and close deals. When it comes to financing niche properties such as hotels, it is strongly recommended that you use a broker. A hotel mortgage certainly qualifies as a niche property.