Private Hard Money Lender in California, Texas and Arizona: The Pitfalls of Having a Commercial Mortgage

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Tuesday, June 21, 2016

The Pitfalls of Having a Commercial Mortgage

Finding a new place for your new business to call home is a very exciting thing. Most of the time, people will forego renting and get a commercial mortgage on the property they want. But is that the best option for you?

You finally have the business that you have been dreaming about for years. You have a great product that you know people will want. The ad campaign that you have implemented has been driving thousands of customers to your company. Now all you need is somewhere to put everything. This is where a commercial mortgage may come in handy.

Having a place to have your business run out off should be the goal for every small business owner. Once you wade through all the searching and debating and you find where you want to move your business, what’s next? At this point you now have two options, either rent a space or go head and make a down payment on it. This is where commercial lenders come into the picture. Many small business owners will often choose to take out a mortgage on the space. However, there are a couple of problems you may run into if you take this route
Having a commercial mortgage means more than just owning a property

For many small business owners, money can be very tight the during the first stages of their business. Commercial mortgage lenders only loan out a partial amount of the property you are purchasing. The other portion, of course, comes from you. Usually, this is amount one-fifth of the cost of the property. This may not sound that bad, but you also have to factor in your regular business costs. Things like, supplies or advertisement this also becomes an issue if you have more than one employee. Adversely, if you rent the property you want you usually just have to make a deposit of one month’s rent for the property.

Along with the regular costs, you already have as a business owner you could potentially take on new ones. For example, you are the owner of a property that serves as a boutique for clothes. On a cold day, the pipes freeze and burst flooding your entire showroom floor ruining a large portion of clothes. You now are faced with a myriad of issues. You have to call a plumber to fix it of course. The clothes you had are now cannot be sold, and now you have to close you store to make repairs. Now you are stuck with all the bills and you may lose customers for a period of time.

Having a commercial mortgage on a property more of a commitment

Say the only place you could find that was affordable was in an area not conducive to your business. If you were to choose a commercial mortgage over renting you are basically locked into that property. Yes, you could always sell it, but with that, it consumes a lot of your time trying to find a potential buyer. Also depending on the market you are in it could take months before the deal is finalized. You also have to inform your mortgage lender of your plans throughout the process as well.

Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 

Texas Tel:      (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701    

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About the author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true.

Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.