Loan Options for Commercial Real Estate Investment

If you are interested in investing in commercial real estate, you may be looking into financing options. The bad news is that many lenders are more hesitant to lend for commercial properties. However, the good news is that there are many financing options. The following are four types of commercial loans to help you invest in real estate.

1) Conventional Mortgage

Conventional mortgages are one of the simplest ways to borrow to buy a commercial property. They come with relatively low rates and can provide significant loan amounts. However, they often require at least 20% of the value of the property as a down payment. Additionally, borrowers typically need strong credit to get the best rates. Lenders are often stricter about commercial mortgages than residential ones.

2) Hard Money Loan

Some lenders offer hard money loans. These are an alternative to conventional mortgages. They are easier to qualify for and lenders usually have a much higher tolerance for your debt-to-equity ratio (how much money you are borrowing versus how much you own). However, hard money loans usually have higher interest rates. Additionally, they are intended for short-term borrowing. Many have terms of 36 months or less.

3) Fix and Flip Loan

Property flipping is a great way to earn a significant return in the real estate world. One of the common challenges is that traditional loans only cover the purchase price of the building. If you are going to renovate it, you need to provide that money yourself. However, a fix-and-flip loan lets you borrow against the after-renovation value of the property. This means that you will have extra funds to help pay for renovations.

4) Private Money Loan

This is another form of alternative loan. It can help you get a tailored solution, especially on a high-value real estate project. Unlike other loan types, private money loans are funded by individuals and non-lender capital sources. They are usually facilitated by a professional lender. The funder will want a significant return on investment. However, this type of loan often has a much higher tolerance for risk.

Get Started Today

Discover more about the types of lending for commercial real estate projects today. Investing in real estate can be a great way to ensure your future success.  By learning more about how to finance your projects, you will be better prepared to achieve your goals. You can use commercial loans for purchases, renovation and refinancing. Effective use of them means that you will earn better returns.


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