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Commercial Mortgage Strategies - 1031 Exchange Seasoning of Ownership Limitations
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By Stephen Bush

Commercial mortgage lenders will frequently have very specific requirements stipulating that purchase funds must have been in a verifiable account for a specific period of time, often 3-6 months or longer (this is called seasoning because it is tantamount to requiring that the funds have matured by being in the same place for a while). Seasoning of ownership for commercial mortgage loans is similar to seasoning of funds, except this requirement involves the minimum time someone has owned a commercial property before they can refinance the property. Most traditional banks require a minimum holding period (usually a year or more) before a commercial mortgage loan can be refinanced. That minimum period is the ownership “seasoning limitation”, and if it is one year then it means that a commercial mortgage loan cannot be refinanced for at least a year.

That is not a particularly troubling limitation EXCEPT in the case of refinancing after a 1031 Exchange. In the case of Commercial 1031 Exchange properties, commercial borrowers should benefit from commercial mortgage loans for 1031 Exchange Refinancing without seasoning of ownership limitations , and there are a limited number of sources which do not impose ownership seasoning limitations on refinancing 1031 Exchange Properties.

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WHAT IS UNIQUE ABOUT THE 1031 EXCHANGE REFINANCING SCENARIO?

In simplified terms, with a 1031 commercial real estate exchange, owners are required to reinvest their equity in a subsequent qualified purchase. Commercial mortgage borrowers who have properly completed 1031 Exchanges might want to tap into some of their equity shortly after a 1031 Exchange is completed via 1031 refinancing. These borrowers will usually encounter seasoning of ownership limitations from most lenders that will effectively prevent such a refinancing. If a commercial mortgage borrower wants to consider 1031 Exchange refinancing and has recently completed the 1031 Exchange, they should seek out!
a lende
r without seasoning requirements or limitations. However, there are many technical issues surrounding a 1031 Exchange and 1031 refinancing that will require commercial borrowers to consult with a qualified 1031 Exchange advisor before proceeding with refinancing of commercial 1031 Exchange properties.

Copyright 2005-2006 AEX Commercial Financing Group, LLC. All Rights Reserved.

Stephen Bush is the Founder and Chief Executive Officer of AEX Commercial Financing Group, LLC ( http://steve.bush.googlepages.com/aex ). Information about enrolling for a free online six-part series of Special Commercial Financing Reports or a free online seven-part Commercial Mortgage Course is available at all AEX Commercial Financing Group, LLC websites (including http://www.aexcommercialfinancing.com ). AEX Commercial Financing Group, LLC is based in Ohio and provides commercial real estate loans for purchases, construction and refinancing from $100,000 to $5,000,000 throughout the United States. AEX Commercial Financing Group, LLC also provides assistance in obtaining immediate working capital up to $300,000 using credit card receivables for retail stores, service businesses, bars and restaurants ( http://www.aexcfg.com ).

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This entry was posted on Friday, December 15th, 2006 at 6:31 am and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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