Your Commercial Real Estate Loan Options
Investing in real estate offers you almost unbounded opportunity. All it takes is an understanding of the markets you’re investing in, creativity, and a shrew eye for a deal. Since there are dozens of ways to make a real estate investment profitable, it stands to reason that one financing tool could not meed the needs of every investor. That’s why there are so many options out there for commercial real estate loans, and understanding the purpose of each makes choosing the best one easier.
Traditional Bank Loans
These products are the ones that look most familiar to homeowners because they are fixed rate term loans with sizable down payments and income requirements. They tend to offer 10 or 20 year terms and very low rates if you can qualify. Depending on the bank, LTVs may be as low as 60% or as high as 80%.
504 Loans from the SBA
The 504 program exists to help small businesses buy fixed assets, so the loans can be used for equipment or real estate. Down payments can be as little as 10% for qualifying applicants, but the loan is not directly from the SBA. Instead, the SBA guarantees a portion of it and a bank underwrites the loan. That means both need to approve your application.
SBA 7a Loans
The SBA’s 7a program is specifically built for small businesses looking to buy and improve commercial real estate. Program restrictions do limit what kind of investment you can make, but this program is especially popular with those looking to rehab and run hotel properties.
Construction Loans
Where traditional loans are based on the value in the property at the time they are underwritten, construction loans work differently. They use milestones to evaluate the construction of a project and the equity built into the project site, then unlock more funds for the continuation of the build. This keeps large projects from running off course after receiving a massive influx of funds by providing the lender with more oversight.
Commercial Real Estate Bridge Loans
For those looking to fix up and flip a property in just months, bridge loans from private lenders are often the most cost effective choice. These loans are often worth up to 100% of the purchase price. They are often built to have a one-time principal payoff at the end with only interest payments due during the term as well. That makes them ideal for investors expecting a large payday after the resale of a property. If you are looking to close fast so you can turn a commercial property, contact a lender today.
