Commercial Real Estate Financing: 3 Keys to Success
Before enjoying the fruits of real estate investing, you have to understand the dollars and cents of it. Buying property isn’t particularly easy or cheap, so having a good grasp of commercial real estate financing will go a long way in your quest to make money in the arena. To make sure you explore the right angles and get the funding you need, here are three important factors.
1. Quality Loans
Borrowing money from any old lender for any old amount is a great way to kill your real estate empire before it has a chance to get off the ground. First off, it’s not easy to get a big loan with decent terms unless your application is immaculate and you have a sizable chunk of your own money ready to invest. Second, if you go with a bridge or hard money loan and aren’t able to make the sale work, you could end up in some very hot water financially.
The loan you get should depend on details of your project and how long it will take you to see steady returns. Commercial real estate financing is very different from one project to the next, so don’t assume the same loan will work for a flipping project and an office rental. Talk to bankers and people with experience in the industry to make sure you’re targeting the right type of money.
2. Solid Outreach
In some cases, your financing is best done through contacts you already have. Through either a crowdfunding project or personal investors, you might be able to get the exact amount of money you need in a short period of time and with excellent repayment terms. Think about who might serve as an investor for your project and how that can benefit both parties in the long run.
3. Seller Assistance
Sometimes the best form of commercial real estate financing is sitting right in the building you’re trying to buy. When a seller wants to avoid taking a huge tax hit, one tactic is to accept money in installments or drop the asking price. This can ease the burden on the buyer while actually saving the seller money, even though fewer dollars are exchanged at the point of sale.
When you get into the swing of things, each property will be easier to finance. In the early going, however, you need to understand the ins and outs of commercial real estate financing so you can get the money you need without all the baggage.