The Basics of Commercial Real Estate Financing
Invest in commercial real estate today by securing the best financing option available. Whether you’re looking to purchase real estate for your business or investing in rental properties, you need competitive financing for your investment strategy. Discover how you can receive great financing by carefully reviewing your options and creating a strong application.
What type of real estate are you looking for? The type of business opportunity can affect your financing option. Most real estate investments are either owner-occupied commercial properties, commercial properties for lease or rental units. Some financing is only available for certain uses, so determine the best way to invest your financing based on your location, background and available properties.
Some properties may initially seem like a poor investment. Damaged, outdated or incomplete commercial real estate typically sell for far less than the location would otherwise suggest. For many investors, the time and financial needs of renovations are enough to deter them from these hidden gems. While you may not have the working capital on hand to purchase and repair a commercial property, consider leveraging your financing.
Choose a hard money loan or line of credit to renovate your commercial property. A hard money loan requires an asset as collateral, while a line of credit typically requires a great credit score and business financial statements. These loan options are short term but offer the flexibility you need to invest your money however you wish. Purchase less-than-desirable property, hire a professional contractor and restore damaged property to improve its value. Once your renovations are complete, your commercial location should qualify for a traditional commercial mortgage, which you can use to pay off your short-term financing.
With the right property and design, you’ll receive an excellent ROI from your property investment. Whether you’re holding onto a rental unit for long-term investing or fixing and flipping a commercial property, work with professional contractors and a real estate agent to reduce the risk of your investment strategy and secure the returns you need.
Before you launch your new commercial real estate investment project, you need to check your application. How are your credit score and cash flow? If you’ve never purchased commercial property before, you may not realize all the hidden fees that come with renovations. Ensure you have a firm business plan, great credit score and reliable source of flexible working capital should your commercial property require more financing than originally expected.