When it comes to commercial real estate loans, higher risk, means a higher rate. It’s one of those ‘unwritten laws’ of business. One that’s followed because even experienced, professional developers can have trouble getting new development projects started. Which is why traditional lenders like banks tend to run away from land deals.
More red tape is the latest sign that the the aftershock of the 2008 financial crisis are still being felt. In early 2015, new regulations for commercial real estate investing took effect for most banks. The regulation requires banks with over a half billion dollars in assets, as well as all savings and loans to set aside more capital against certain construction and development loans.