Everything You Need to Know About Commercial Real Estate

Investing in commercial real estate can offer you excellent rewards. While it requires patience, hard work and an eye for great investments, real estate investment is still a solid strategy for leveraging your finances. Learn how to get started and compare popular financing types today.

The two main factors in commercial property investment is selecting a property and selecting a loan. Most properties are purchased with a loan. Even if you’re capable of buying property outright, you may want to consider holding back some of your working capital and using your available financing to secure your ideal investment property.

A traditional way to secure property is through a conventional bank loan. This type of loan offers competitive interest rates and long-term payment options. While many commercial loans come with a balloon payment, a bank loan can still come with a fully amortized payment plan. However, you typically need a strong credit score. Your loan may also come with prepayment penalties.

A hard money loan is a popular option for a fix-and-flip project. If you need to a financing option that comes with additional cash to invest in renovations, a hard money loan is a versatile option for you. A hard money loan is also called a bridge loan, since it’s designed for this specific process. You’ll typically be charged high interest rates, but the short payment schedule means you won’t be accruing interest for many years.

Finally, SBA loans are popular options for owner-occupied real estate. When you need a competitive loan to purchase a building for your small business, loans backed by the Small Business Administration are an ideal option. You typically won’t have to have as high of a credit score or prove as long of financial history compared to traditional bank loans. Whether you choose an SBA 7(a) or an SBA 504, you’ll have access to additional funding to make necessary repairs.

Take stock of each of these loan options and learn more about the option that’s right for you. Discuss your commercial real estate goals with your lender to determine the best course of action. Your lender wants your investment strategy to succeed, so they’ll work with you to find the ideal solution to maximize your profits and minimize your risk. Once you select the ideal property and become approved for a loan, you’ll be on your way to a successful real estate investment strategy.

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