Securing funding for properties in less-than-ideal locations
So you've finally found that perfect piece of real estate – but unfortunately, the bank doesn’t seem to agree because it’s not located near a population center. Traditional financing institutions are not willing to fund deals outside of cities or other major population center, citing risk aversion. Banks and other conventional lenders are concerned about what will happen in the event a borrower defaults on their loan. For properties in and around cities, lenders presume that that they can easily recuperate their money in the event of a defaulted loan. In rural areas, however, if a borrower defaults and the bank forecloses, the property could wind up on the market for months or years before a buyer comes along, devaluing it and creating a headache for the financing institution. The intended use of land in a rural area also impacts conventional lenders' considerations. For example, financing institutions face limits on foreclosing on a farm if the owner derives their primary income from the property. That can add 12 months from the date of default before foreclosure proceedings can even begin. The risk of getting tied up in years of recuperating efforts is enough to discourage most conventional lenders from issuing loans to these types of properties.