Hotel financing is a crucial element in the process of hotel ownership.
There are a variety of financing options available and some of them may
be unfamiliar. There are resources ranging from investment companies
and private investors to banks and other financial institutions.
Many of the events we are involved in and attend touch on hotel financing. Some of which are exclusively for the education or networking of hotel financing. We collectively work towards providing such resources at our annual event as well as various private events and collectives.
Make sure to review their previous work to make the best decision for your project. It’s important to invest in your future and can be one of the most rewarding things you can do. Ensure you get it done right, do your research and consider all of your options and resources before investing.
Below are some examples of the types of loans you may consider.
CAN I QUALIFY FOR A CONSTRUCTION LOAN?
Securing a construction loan is getting increasingly difficult. Recourse loans are available from bank syndicates, national banks, regional banks and SBA 504, depending on the loan size and the borrower’s development experience, net worth and liquidity.
Non-recourse options are available but are expensive. These lenders are also quite particular about development experience. In addition, the non-recourse lender will require a completion guarantee.
WHAT IS A PERMANENT LOAN?
Permanent loans are almost always non-recourse. For maximum cash out, CMBS is the only consistent option with LTV’s up to 70%. Life companies are active but at lower leverage (55% to 60% LTV) and higher amortization.
A permanent loan will have a fixed interest rate for the life of the loan. All permanent loans have onerous prepayment penalties either with defeasance or yield maintenance.
You need to be very careful about doing a permanent loan if you are considering selling your hotel, and you should consult with a hotel real estate lender regarding loan amount and assumption features.
We urge all to extensively investigate any individual or organization seeking your investment. Financial fraud is notoriously difficult to prosecute. Your best protection is to be extremely cautious with anyone asking for money.