You may already know that a hard money loan is a loan which is backed by a "hard" asset. The amount of financing you receive is usually a set percentage of the value of that asset, or LTV. Learn some strategies to help your lender look past the LTV in order to qualify for the most financing possible.
Giving loans at the lowest possible LTV is the primary way asset-based lenders protect themselves. A higher LTV means a borrower has less at stake in the event of default, and asset-based loans rarely exceed 75 percent in LTV. What if you need a larger loan which exceeds the standard 75 LTV benchmark? While LTV may be the most critical factor a lender will consider, there are other factors also taken into consideration, which can give you leverage to negotiate a larger loan.
Say you need a 760,000 dollar loan to finance the purchase of a million dollar property , in this case the LTV would be 76 percent. While the LTV on this loan is high, in this instance you would have 240,000 in equity invested which may be an amount significant enough to help your lender look past the LTV. You should also consider any other property you own, which could be used to back the loan ( a practice known as cross-collateralization).
If your home is worth 250,000 and you use it as collateral to secure the loan, in effect you have 490,000 of your own money backing the loan. These are just two specific instances were any reasonable lender could look past the LTV, but you should also take steps to demonstrate your strength as a borrower.
If you can, build your hard money lendersconfidence in your strength as a borrower
Any reasonable lender will also consider your strength as a borrower and not just the LTV. Even though private lenders have a less traditional approach, the three C's of credit, capacity, and collateral still apply. Credit refers to your history of paying your debts on time. A reasonable lender might look past the LTV if you have a solid credit history. Capacity simply refers to your ability to service your debt on a monthly basis, so if you have a good steady income, you may qualify for a larger loan. LTV may be the most important factor when it comes to asset-based loans, but it is just only one factor a lender might consider. Evaluate your financial situation and demonstrate your strength as a borrower.
If you can thoughtfully consider your situation, you can increase your eligibility for a larger hard money loan
First consider the dollar value in terms of equity you have invested, knowing this number you can demonstrate to a lender exactly how much you have at stake. Take into account any other collateral you might have to back the loan and build your lenders faith in your strength as a borrower. Using any one of these strategies might help your lender look past the LTV which could help you qualify for a larger loan.
Dennis Dahlberg Broker/RI/CEO/MLO Level 4 Funding LLC Private Hard Money Lender Arizona Tel: (623) 582-4444 Texas Tel: (512) 516-1177 Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378 22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027 111 Congress Ave |Austin | Texas | 78701
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.
Commercial real estate loan rates were ridiculously low until recently when rates started moving up. The ten-year government note has moved from 1.44% on January 1, 2018 to over 2.85% on Friday, January 9, 2018, with projections up to over 3%, 3.5% and 4% in the next 60 days. You most likely will not see current rates this low again in your lifetime. Commercial loans are at these low rates because commercial real estate loan companies are sitting on an ocean of cash, nearly $2 trillion dollars. Commercial investors still feel hesitant, however, to overextend with loans from the shock they experienced by the recession of 2008.
So just which commercial loan is best for you? A life Insurance company, a conduit, a credit union, an SBA lender, a commercial bank, a USDA Business and industries lender or even a hard money commercial lender? A life insurance company offers the most attractive commercial interest rates that are only 0.35% to 0.50% higher than the prime residential mortgage rates. Be aware, few life insurance companies will touch commercial projects smaller than $5 million. The project must be very standard and cannot be older than 20 years.
The next avenue which is available is a CMBS where commercial real estate loan rates are 50 to 65 basis points over the prime residential mortgage rate. For projects between $3 to $5 million and up, a conduit may be an appropriate choice for you. They will also finance older properties. For projects with good credit principals, banks and credit unions may be a good option. The rates run typically 0.75% to 1.50% over prime, 30 residential mortgage rates.
SBA and USDA Loans
SBA, if you qualify, should be considered first. The standard 7a SBA loan is 2.75% over prime floating. With the SBA you can quality for a 90% loan-to-value and the loan is fully amortized over 25 years. You must have a credit score of 700-plus and financials for the last several years. The USDA loan is less attractive. The loans are made through banks and guaranteed by the USDA and they are similar to SBA loans--2.75% over floating prime and fully amortized over 25 years. These properties must be located in eligible rural areas in order to qualify.
Although an effort has been made to quote current rates, this is a fluid market and, as pointed out, rates have increased since the first of the year and are fluctuating.
Once underwritten, residential mortgage companies can sell the mortgage to Fannie Mae or Freddie Mac. The illiquidity of the commercial market, since they do not have an agency to sell their underwritten mortgages to and these types of loans are seen as higher risk, results in commercial mortgages 0.35% to 1.50% higher. Before applying, you need to get all your ducks in a row including property type, projected cash flow, age of property and projected operating expenses. For many real estate investors who require quick capital for their next project, a hard money loan is the answer. Call us at Level 4 Funding for a no-obligation quote.
Dennis Dahlberg Broker/RI/CEO/MLO Level 4 Funding LLC Private Hard Money Lender Arizona Tel: (623) 582-4444 Texas Tel: (512) 516-1177 Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378 22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027 111 Congress Ave |Austin | Texas | 78701
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.
It is almost surprising how most business people look at a commercial bridge loans and assume the worst. Of course, like any other commercial loan option, there will always be pros and cons but that doesn’t mean you or anyone should just write these particular loans off.
As you may already know, a commercial bridge loan or a non-residential bridge loan is basically short-term or rather interim financing for a commercial or investment property. Many businesses, developers, and commercial investors choose to utilize this particular kind of financing because it helps them achieve a particular purpose quickly. Yet, despite this specific benefit, many people seem to be wary about obtaining a commercial bridge loan.
The reasoning behind this apprehension seems to be based on several common misconceptions. For instance, many people see a commercial bridge loan as just another debt i.e. another debt they are adding to the pile. But, as previously mentioned, that’s really not what a bridge loan is at all. Remember this particular kind of financing helps you cover costs or move quickly on a property while you secure long-term financing, which is generally used to cover the bridge loan.
Another common misconception is that getting non-residential bridge loans means extremely high interest rates. Well, the truth is yes, these particular loans do come with a higher interest due to the short time period that they generally cover. But, again it’s a higher rate not a completely unreasonable one. In fact, the only time you will ever encounter extremely high rates with a bridge loan is if you exceed the timeframe you originally selected. In other words, if you secured a bridge for 3 months but you are able to pay it back in that timeframe due to issues with long-term financing then your interest rates will likely go up or you will incur additional costs and penalties.
In addition to not fully understanding the terms and costs of non-residential bridge loans, people also tend to believe that these loans are strictly for property acquisitions. But, the truth is commercial bridge loan can do so much more. For instance, you can use a non-residential bridge loan to cover the cost of raw materials for improvements or if you need to ensure that business will continue as usual in the light of corporate and company changes i.e. a business partner leaving, etc. So as you can see you can do a lot of things with your bridge loan. Nevertheless, it is still important to note these particular kinds of loans cannot replace regular loans. Moreover, you really wouldn’t want these particular loans to replace regular loans due to their higher interest rate, which would make your loan more expensive overall. With that being said, if you need short-term financing assistance a bridge loan is more than capable of helping make your business or commercial investment dreams come true.
Ultimately, non-residential bridge loans can provide you access to funding when you need it. Thus, it is always beneficial to do your research i.e. figure what is fact and what is fiction. In doing so, you will ensure that common misconceptions don’t put a wrench in your business plans.
Dennis Dahlberg Broker/RI/CEO/MLO Level 4 Funding LLC Private Hard Money Lender Arizona Tel: (623) 582-4444 Texas Tel: (512) 516-1177 Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378 22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027 111 Congress Ave |Austin | Texas | 78701 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.
Investing in a commercial property can be an exciting time and receiving multiple commercial lender offers can be just what you need to know that you are on the right track. But, in the spirit of things, it never hurts to double check to make sure your loan offers are offering you just what you expected.
More than likely, you have applied for a commercial bridge loan or two or even three and your lender offers are slowly coming in. Generally, it is at this time the tough decisions have to be made. In other words, when you are dealing with multiple offers, you need to truly weigh your options as no two lenders are completely alike. Since no two lenders are alike, this typically means that one commercial bridge loan offer will ultimately be better for you than the next. Thus, with that being said, it is simply your job to find that special one.
So, how can you find the best commercial bridge loan for you? Well, it pretty much goes without saying that you should always make sure the commercial loan offer you are leaning towards is the right size for your property or investment. For instance, many lenders offer property specific bridge loans such as small apartment bridge loans, medium to large apartment bridge loans as well as your standard bridge loans i.e. the larger bridge loan for commercial properties such as healthcare facilities, industrial warehouses, self-storage facilities, office buildings or retail properties and of course mixed use buildings.
As you will come to quickly learn, with bridge loans is not so much about how much you can borrow, but, rather what the minimum amount you need for your specific property is. Thus, you will often see small bridge loans starting at a required minimum of $1,500,000 (Max LTV 90%) with medium to large and standard commercial bridge loans starting at a required minimum of $3,000,000(Max LTV 80% to 90%). Therefore, to make a long story short, make sure your offers are covering the right property type and that you are ultimately choosing a loan that allows you to accomplish your plans without unnecessarily costing you a bundle.
In regards to your potential bridge loan term, of course, they will vary from—as previously stated. But, generally, you should expect loan term options that cover a short period of time (around 6 months is typical) and that may allow for a possible extension if you can’t accomplish your goals within the selected loan time frame. You can also expect to pay an origination fee and other minimal cost associated with your loan. Nevertheless, if you do find a loan offer with the right amount, a good rate, manageable payment schedule acceptable terms and conditions—well, then you’ve pretty much found your offer.
Ultimately, regardless of the lender you work with or the offer you end up choosing, you can also expect your bridge loan to require that you have a minimum of 75% in equity/ collateral.
Dennis Dahlberg Broker/RI/CEO/MLO Level 4 Funding LLC Private Hard Money Lender Arizona Tel: (623) 582-4444 Texas Tel: (512) 516-1177 Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378 22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027 111 Congress Ave |Austin | Texas | 78701 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.
Commercial Bridge Loan, Commercial Lenders, Hard Money Lenders
Dreaming of an Investment Property? Well, find out if a commercial
bridge loan is your dream come true or a nightmare.
In any industry things
can move quickly, commercial real estate or investment properties are no
different. Sometimes, it is your best interest to move quickly with a purchase.
For instance, say you are interested in a foreclosed property time is usually
of the essence i.e. you need to move quickly in order to purchase said property
before someone else does. This particular scenario is when most commercial
buyers consider applying for a commercial
bridge loans. Other instances
where many companies looking into bridge financing is when their current
mortgage is due and they have yet to find or rather secure a replacement
mortgage or if a company needs to cover shortfalls in regards to general
capital say for an upcoming balloon payment.
Before you consider a commercial mortgage, it is
important to know what you need to qualify for one. Lender requirements are
often just the beginning.
Commercial
Lending i.e. commercial
real estate loans. are nothing to sneeze at. In other words, you’d be
surprised how much of an impact commercial
bridge loans have on the overall financial future of companies.
Consequently, when it comes time to enter the vast world of non-residential
mortgages, it is extremely important to your eligibility. Of course, you may be
asking yourself, aren’t non-residential mortgages loans similar to most mortgage
loans? Well, obviously the answer to that question is no.
There are a multitude of commercial
real estate lenders. Are you sure you found the right loan for your
business venture?)
If you haven’t done
your research yet, it may behoove you to know that there are several different
types of commercial
real estate lenders. However, our focus will be on joint venture loans,
participating mortgages and your standard real estate purchase loans. These
particular commercial loans tend to be the most common choice when it comes to
business ventures. Thus, with that being said, let’s go over what each of these
loans can do for you and your next business venture.
For starters, a joint
venture loan is what you want when all parties (generally two partners) are
willing to share equally in the losses and profits of the property. Moreover,
this particular commercial loan is extremely beneficial to those parties that
cannot or may not be able to qualify for financing separately. A real estate
purchase loan, on the other hand, requires one party or rather one borrower
with excellent to near perfect credit along with the saving to back it up.
Additionally, when it comes to collateral, in general, lenders tend to expect
more with these purchase loans.
Lastly,
participating mortgages, in essence, are when your joint partner is actually
your lender. In other words, the lender receives the standard monthly payment
plus interest, but because the lender is also a partner they ultimately share
in the commercial property’s proceeds or income. This third option is
definitely something to look into if you have potential tenants with financial
stability and long-term goals.
Who are Commercial Hard Money Lenders and What do They Offer
You may be new to the commercial investment property business or
you may be a seasoned vet. Regardless of which category you fall under it never
hurt to consider all your lending options and be clear on what they all have to
offer.
Commercial
hard money lenders are generally
non-banking institutions i.e. private individuals or small groups that solely
provide fast financing for such individuals as house flippers, developers and
so on. Typically, most people that venture into the world of commercial real
estate and investment properties are familiar with the term hard money. But,
more than likely do not know exactly what a hard money loan is. This may sound
strange, but the fact is unless you are in the business of flipping houses or a
developer, hard money is a hard concept to follow.
In other words, you are
not alone when asking the question just who exactly needs hard money? Moreover,
how does hard money differ from standard financing? Well, the obvious answers are
listed above. But, the in-depth answers are that hard money is for individuals
who for a variety of reason cannot qualify or obtain conventional or rather
standard loans/ financing and hard money differs from standard financing
because there is simply less red tape.
All in all, this may
sound like these particular individuals have bad credit or are just from a bank
standpoint a bad investment, but the truth is this isn’t always the case. Nine
times out of ten, the people that need hard money are those that need to move
quickly on a property and often times need to borrow the full purchase price.
Consequently, these people are often far from a “bad investment” as most commercial
hard money lenderrequire their borrowers to back up hard money with
real assets i.e. the collateral and credit are often more than there. In
reality, it is often the banks that simply cannot move at the required speed
necessary to allow the borrower to make a profit
Private Money Lenders vs. Commercial Hard Money Lenders
We know that commercial
hard money lendersaren’t banks or other traditional institutions that
are in the business of loans, but are they private money lenders? Moreover, if
hard money lenders are not private money lenders, then you may just be asking
yourself, well who are they?)
There are often so many
interchangeable terms when it comes to the world of commercial lending that it
is easy to forget that not all interchangeable terms always mean the same
thing. For instance, it is not uncommon to hear the phrase private money
lenders and naturally think non-bank lenders. Moreover, when people think of commercial
hard money lender, they are also inclined to think non-bank lenders.
Are you confused yet? Well, it is okay if you are because you are definitely
not alone.
The reality is both
private money lenders and commercial
hard money lenders are traditionally not banks. But, that doesn’t mean
that both of these non-bank lenders are the same nor do they offer the same
loan options. So, now that that’s a little clearer, let’s go over just how
these two particular commercial money lenders are different.
For starters, you will
learn very quickly that hard money loans meet a very specific need. For
example, let’s say you are a house flipper or a commercial developer and you
need quick, short-term financing without a lot of red tape. These two instances
are generally when you want a hard money loan. In fact, these instances really
make up the bulk of hard money loans. Moreover, it is because of this fact that
hard money lenders appeal to a certain niche market. Private money lenders, on
the other hand, are more relationship-based and offer loans for real estate
transactions—plain and simple. In other words, there really are not any
specific scenarios where you absolutely need to contact a private money lender
to provide financing rather private money lenders are basically just another
non-bank financing outlet.
Pitfalls to Avoid with a Commercial Bridge Loan
In the fast pace world of commercial real estate and investment
properties, a commercial
bridge loan can be just the type of funding you need to keep your
investment plan running smoothly and many loan scammers are aware of that fact.
So, in order to avoid being scammed let’s go over a few red flags.)
If this is your first
time applying for a commercial
bridge loans, you may be surprised to know that you are actually not
alone. Up until recently, many people simply did not use bridge loans due to
the fact credit was once upon a time much easier to get. But, unfortunately, we
no longer live in a world where that is the case i.e. it is much harder to
obtain financing and even harder to maintain good credit.
Since bridge loans were
somewhat of a foreign concept until recently, many people simply do not
understand how they work, which means many do not know when they are actually
getting scammed. Clearly, this is one of the main reasons to do your homework
when it comes to applying for a commercial bridge loan. If you are like most
businesses, much of your financial future depends on not being a party to a
loan scam.
Typically, with a commercial
bridge loan, the most common pitfalls and scams are the bait-and-switch
loan scam, the upfront fee loan scam and of course the old-fashion identify
theft loan scam. Out of all three of these particular loan scams, the one you
time and time again is actually the upfront fee scam since actual lenders
generally charge an upfront fee. So, you may be asking yourself, if actual
lenders charge upfront fees how will you know if you are being scammed or not?
Well, the answer, of course, lies in the details—the actual details i.e. pay
attention to email addresses being spelled correctly and lender addresses.
Commercial Hard Money Lenders—Who are they for?
You hear it all the time—commercial
hard money lenders are here to help when traditional funding lenders
can’t. In many ways they do help, but generally, it’s the seasoned real estate
investors that benefit most.)
Commercial
hard money lenderare a great option when
looking for short-term financing and when you do not have the picture perfect
requirements (stellar business credit scores, excellent financial conditions
and so on) for traditional lending institutions such as banks or credit unions.
But, what nobody tells you is that commercial
hard money lenders are not for the timid or for the unseasoned real
estate investors that are new to the commercial investment game. Of course,
this fact doesn’t mean hard money itself is any more complicated than private
money or traditional funding (soft money); rather it just means that those who
have been in the business for a minute know the tricks that commercial lenders
like to play.
For instance,
commercial lenders are still in the business of making the most on their
investment. Thus, with hard money, these particular lenders aren’t afraid to
charge a higher interest rate. For those individuals that know hard money is
for moving quickly on a lucrative investment, these higher rates are not really
an issue. In other words, they see a great investment, they find a reputable
commercial investor and in less than a few business days the deal is done. With unseasoned real estate investors, you
need time to get your feet wet as well as time to weigh all the pros and
cons—this is, of course, perfectly okay and generally just the nature of the
beast. But, nevertheless, if you need extra time to make your move that’s still
extra time you are essentially sitting on a lucrative investment, which in the
long run generally means more costs and higher fees.
Similarly, if this is
your first or second time utilizing a commercial lender for a hard money loan,
you need to make sure that you have enough capital to pay back the loan and
that you are working with a reputable lender i.e. check their credentials.
These are generally things that a seasoned real estate investor can do
seamlessly. So, remember if you are new to the game, that’s okay, just make
sure you find the right lender, the best rate and move quickly on your
investment.
Why A Commercial Hard Money Lender May Be Right
For You
Ready to move on with business, but your
traditional bank loan officer may not be? A Commercial
Lenders may just be the right solution for you. Find out why this is the
real deal.
So, you’re
ready to move on with business, but in need of a timely loan? Let’s go as far
as to say that you’re ready to make your move and acquire that piece of
commercial real estate, and are hard-up for funding? The good news is that you
don’t have to be hard-up for hard money. A Commercial
Lender is a very viable, attainable option for you and here is why.
1)Commercial Lenders are able to provide
commercial hard money loans in a timely and efficient manner. They have the
depth of understanding that the time to act on your piece of potential real
estate is now, while others like yourself are competing with dueling bids. You
simply may not have time for the traditional bank loan application approval
process and funding that can sometimes take up to several weeks.
2)If you’re concerned about being denied a traditional bank loan or have
currently been denied one, Commercial Lenders
are likely more willing to work with you than other banking institutions. While
there are many reasons why you may have been denied a bank loan, a Commercial
Lender will often let your history of denial be just that, history.
They deal with you in the “here and now”–meaning, equity invested and will the
loan be repaid.
What Are Other Things To Consider When Contemplating Using A Commercial Lending?
You
understand that the commercial real estate opportunity of a lifetime could be
passing you by as you wait and wait for a potential bank loan approval and
related funding. In addition, you should know that Commercial
Lending aren’t what they used to be. They are on the up-and-up, helping
folks like you on a daily basis. Long gone are the days of risky loan practices
and extraordinary interest rates. Today’s Commercial
Lending wants to work with you and see that you succeed! Your success
is their success!
For A Successful Loan
And Funding Process,
Commercial Lending Is Something For You To
Research And Consider
At the end of the day, your goal to secure a potential commercial real
estate property is a loan. Because Commercial
Lenders are willing to work with you, focusing on the value of the
property and not on your history and credentials, researching and considering
this type of lender may be just right for you. You will stand a much better
chance of reaching your goal, so get started now!
Consequently, here is something you should definitely keep in mind when determining what kind of lender you should be working with. Above all else, it is important to note that residential hard money financing is appropriate in a variety of scenarios such as impaired credit, liens or judgments, time constraints, pending foreclosures and Foreign Nationals—just to name a few. Thus, if you are still interested in your residential hard money options, it helps to focus your lender search on niche lenders that can meet your needs (whatever they may be) and vice versus.
Dennis Dahlberg Broker/RI/CEO/MLO Level 4 Funding LLC Private Hard Money Lender Arizona Tel: (623) 582-4444 Texas Tel: (512) 516-1177 Dennis@level4funding.comhttp://www.Level4Funding.comNMLS 1057378 | AZMB 0923961 | MLO 1057378 22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027 111 Congress Ave |Austin | Texas | 78701 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.
Commercial real estate can be a very profitable business once you get started, however, it can be hard getting the money needed for your investment. In this article, you will be able to find out to get the property you want without little to no down payment.
Everything in this world costs money we all know that, but there are always going to be instances when you will not have all the money up front. If you want to purchase commercial real estate you still can! The “Great Recession,” halted a large portion of the home renovation business a while. However, the fix and flip business is making a steady comeback.
A lot of commercial real estateproperties require a down payment. However, if you are just starting out you may not be able to afford that. Do not worry you have a few options at your disposal.One thing that you could do is apply for a loan. Seems very obvious believe us not many people do not think about this before they consider buying. Many commercial lenders are willing to lend you the amount you need to pay for the down payment.
In lieu of a loan from a commercial real estate lender, you could also split the cost of the property with a business partner. Sharing the expense of your new property will make it much easier to pay off the down payment. It also opens the door for new things you may want to do. For instance, instead of only being able to only spend $10,000 on repairs and enhancements, you could share all the expenses and turn a better profit in the long run.
You are not tied to going the liquid money way for the down payment on your commercial real estate property
If you do not want to go the hard cash route to pay for the down payment on your commercial real estate property you still have many options. Some more experienced investors know to have other things they could possibly trade or offer in place of money. For example, you could use collateral to pay the down payment. This can range anywhere from a car, motorcycle, watercraft or anything of value.
If you have the connections, you could potentially trade services, as well. Say you are a plumber and you are moonlighting as a real estate investor on the side you could offer your services on any changes they want to make to their new home.
You could also trade houses with the owner of the property you want to buy. This takes a little convincing and a lot of confidence on your part, but this is a great option if you already have a commercial real estate that you are willing to part with. You want to make sure the home or vacant space you want to trade has equal or greater value.
What if I do not have any commercial real estate property I want to trade?
In this event, you could ask the seller of the property to transfer their mortgage to you. This is a great way to quickly get the property that you want to buy. However, this only happens if the owner wants to get rid of the property quickly. While you are taking on a new mortgage depending on how well you refurbish the property you could pay the mortgage off fairly quickly.
NMLS 1057378 | AZMB 0923961 | MLO 1057378 22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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.
Any form of financing
is going to have some advantages and drawbacks to using it. Commercial bridge loans—like any other
loan--have both.
In a perfect world, there are many things that business
owners would never have to worry over. They would never have cash flow issues.
They wouldn’t have to wait for their long-term financing to come through. If
they needed to make any repairs or changed before they could get approved for a
long-term loan, they would be inexpensive and easy to fix.
The list could go on and on, but the sad reality is that
business owners often find themselves in need of cash for one reason or another
before they can receive approval for their primary loan. Acommercial bridge loan can help them bridge the time gap till the
long-term loan is approved.
However, just like anything else in finance, a commercial bridge loan comes with
drawbacks as well as benefits. It is important to know what they are ahead of
time.
Benefits To Applying For A Commercial Bridge Loan
Of course, the biggest benefit is that your business gets a
much-needed cash infusion, but there are other benefits to getting it through a commercial bridge loan.
One of the more significant benefits is the very nature of
the loan--it's short term. Short term means you have less time to pay off a
loan and can only break the payments down so much, but it also means you pay
less interest. With longer term loans there will be more of a chance you and
your business fall on some hard times. If you struggle to recover and miss a
few payments (or default) getting another loan in the future could be harder.
To keep repayment from being an issue, commercial bridge loans are often structured to be paid back when
your long-term loan comes through. Making your payments will, of course,
improve your credit rating which will make it easier for you to get your next
loan.
Drawbacks Associated With Commercial Bridge Loans
One of the biggest drawback to commercial bridge loans is the most obvious. Since it is a
short-term loan, the payments will be larger. Larger payments are more
challenging to make, and since the term is shorter, lenders are often less
likely to be flexible with payment arrangements. Instead, they will probably be
more likely to tack on late fees and penalties making it even harder to make
your payments.
Of course, you can get around payment issues by structuring
the loan so you can pay it off after you receive our long term one. However,
the longer you take to pay it off, the more interest accrues. Depending on the
size of the loan, the interest can be significant.
The biggest potential drawback is the purpose of the loan
itself. It is meant as a short term solution to help you cover expenses as you
wait for your long-term loan to be approved. What if it gets turned down? What
if, like many people were faced with during the housing crisis, the institution
you are trying to get your long term loan through fails?
You still have to make your payments on time. Should you
struggle with doing so, your credit rating may be adversely affected which will
make it harder to get approved the next time you apply.
NMLS 1057378 | AZMB 0923961 | MLO 1057378 22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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.