5 Tips For Commercial Real Estate Financing
Posted on: 21 December 2015
Commercial real estate financing is a difficult thing to understand at first. There are so many components. However, this list should help you get started in the right direction. Here are 5 tips for commercial real estate financing:
Have a Large Down Payment
Try to put as much as possible down on your investment. This will secure financing many times and let you qualify for better interest rates. If you can't come up with a sizable down payment, then you can try adding on a second mortgage for the property, but this could be a battle to pull off.
Be a Good Borrower
The value-to-loan ratio and the particular policy of your lender influences your loan terms on your investment real estate. Your credit will have a large impact on your rates, so get a credit check for yourself and other investors before trying to close a deal on property.
Think About Big and Small Banks
If you don't have quite as large of a down payment as you would like, or other circumstances are not in your favor, you might go for a smaller bank. The larger, national institutions can also be a great choice if you have more upfront cash. It comes down to whether you prefer saving money in the long run (better interest from a large bank) or having more cashflow for the present day (by putting less down at a smaller bank). Of course, each bank is different and your local branch may even be offering incredible limited time offers.
Ask the Current Owner to Finance
While it is more acceptable to do this now than before, you should still have a plan if you go this direction. Asking for financing from the owner means you'll want to prepare documents, references, and other sources to prove you won't go back on your word.
Think Creatively
If you are looking at the best chance of profit, you need great properties in your portfolio. Don't settle for the basic ways of securing a deal if they aren't meeting your needs. For example, consider exploring equity credit lines, credit cards, even cash from your life insurance policy if you have one. Leave no stone unturned in order to close the big deal you've been waiting for.
Commercial real estate is a game for pros. Luckily, you don't have to spend years learning this game. Following these tips above can get you into the conversations you need to have in order to get even closer to your dream investment property. For additional answers and information, contact a location like NAI Norris Beggs & Simpson or another firm near you.
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