When it comes to successful business practices, commercial buildings are often overlooked as a lucrative source of income. Furthermore, there are different types of loans that can assist property owners with leasing, maintenance and foreclosure. To understand how financing can help you generate more revenue, take a moment to review this basic introduction to commercial real estate.
Do you need cash right away to cover the expenses for your property? True to their name, bridge loans are a temporary solution for borrowers who are still trying to qualify for financing. For those who have good credit and a solid income, this short-term opportunity extends your time frame for securing a traditional loan.
Real estate purchase loans are also common amongst borrowers with significant savings. However, you must have an impeccable credit score to take advantage of this resource. In addition, the property will be classified as collateral. Interest rates are generally calculated using a loan-to-value ratio, which means an accurate appraisal will be required as well.
If you desperately need funding, a hard money loan might be the best option. When foreclosure becomes a possibility, private lenders will sometimes approve funding, but prepared to take on a steep interest rate. While hard money loans are typically considered high risk in the world of financing, it might be just the thing to keep your property intact. In most cases, the only alternative is to accept a sentence of foreclosure.
Do you share responsibility for the property with another person? A joint venture loan is beneficial for commercial real estate that is owned by two partners, especially if you split all the profits and expenses. Even if your professional relationship ends there, investment firms and private lenders can help you submit an application that includes both names. This means you will be equally liable for payments and interest on the loan.
Finally, a participating mortgage is an advantage for borrowers and lenders. This type of loan is common with office buildings and retail establishments because tenants are committed to a long-term lease. Each month, you will be responsible for mortgage payments and interest, but the lender is also owed a percentage of your income from rent and sales. This arrangement also benefits the community so reputable businesses can continue to provide reliable goods and services.
Ultimately, commercial real estate loans are designed to give property owners a choice. Use this guide as a stepping stone to sustainable revenue so you can feel confident talking to commercial lenders.