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The First Global Bank has stepped in with an investment loan package to help investors enter or remain in the home share market. First Global decided to offer this loan as residential developments and investment properties increase. Some of these developments are aimed at the growing short-term rental market.
You may have heard of Airbnb or similar websites that allow anyone with extra space to list and attract visitors. The opportunities offered to hosts in Jamaica are tremendous.
Up to $150 million Investment Loan for Property Upgrades
Since 2016, Jamaicans have seen massive growth in income thanks to the rapidly growing short-term rental opportunity. According to a spokesperson at the First Global Bank, the institution has already disbursed more than $130 million since January 2019 to finance properties for the Airbnb-related market. The bank is willing to lend much more than what borrowers are currently taking.
As Arlene Williams, Vice-President of Personal and Business Banking puts it, the bank has a cap of $150 million per project that it is willing to lend. Currently, loans average $5 million as most of the borrowers are homeowners who are looking to renovate their homes to make them more suitable for accommodating short-term visitors.
Williams further stated that “There is an unrestricted loan pool for this industry. Lending is considered on a case-by-case basis.”
Primarily, First Global Bank’s loan package is for the home share segment of the real estate market. It is available for small and medium enterprises (SMEs) as well as for other short-term rental projects and Airbnb rentals. The bank also collaborates with the Development Bank of Jamaica to finance some of the SME’s projects.
Loans Available Since November 2018
First Global Bank introduced the loan portfolio for home share in November 2018. It came as a response to the accelerating growth of the short-term rental market. At the time, Jamaica saw a rise in Airbnb bookings from 55,000 in 2017 to more than 89,500 in 2018. The Jamaican government is also firmly on board. Last year, the Tourism Ministry entered into arrangements with the Airbnb programme to facilitate easier entry by Jamaican hosts into this lucrative tourism market. On average, an Airbnb visitor stays for five days and the host earns about US$2,600. That is according to 2018 figures. The prospects for home-sharing for revenue in Jamaica remains bright.
Naturally, more and more Jamaicans entered the short-term rental market. But, First Global Bank saw no financial product available that supports people wishing to upgrade their homes, villas, or small hotels. Arising from this situation, First Global Bank decided to introduce this innovative investment loan product. The bank has tailored this investment loan package for persons who need to upgrade or expand their homes or other property for short-term or Airbnb visitors.
Who can Access an Investment Loan?
The target market for this investment loan product includes Airbnb hosts, operators of guesthouses and small hotels. Their benefit is to access financing for property expansion; renovation of existing property; and/or construction of property for small hotels, bed and breakfasts, and other forms of accommodation for visitors.
The bank will accept the property being renovated or other appropriate collateral as security for the loan. In cases where the collateral offered is insufficient to cover the full loan amount, the bank will collaborate with the Development Bank of Jamaica for partial collateral guarantees for SME borrowers.
8.75 Percent Starting Rate, 10 Years to Repay
Borrowers can access this investment loan at a starting rate of 8.75 percent per annum with a repayment period of 10 years. The bank also offers a 12-month moratorium on the payment of the principal. This offer is in recognition of the time needed for renovation and construction. During this period, income would not be coming in sufficiently to allow the start of loan repayments. Investors will have room during the moratorium for building out their investments before the loan repayment period kicks in.
As part of the loan process, the small and medium enterprise will get assistance through referrals to the Development Bank of Jamaica (DBJ). This assistance will enable borrowers to become financing ready. This includes help from the DBJ’s technical assistance voucher programme.
First Global Bank is providing a financial cushion for persons who are seriously interested in Airbnb or short-term rental real estate. The growth prospects of this market are positive and the opportunity is right for investment in this growing market. For persons who desire to enter the short-term rental market and has property they need to upgrade, the First Global Bank’s loan package might just be the ticket to get going. The $150 million per project is a generous cap. For the qualified borrower, securing this loan for a short-term rental real estate project becomes quite easy.
So, if entering this fascinating real estate segment interests you, why not check out how this bank can help you achieve your goals?