Commercial Real Estate Investment
Commercial real estate investment is an exciting industry for entrepreneurs or small business owners to be a part of. Whether you’re buying rental properties, leasing your business location or looking to start a new business with prime real estate, you’ll need to consider your financing options.
If you’re ready to get started in the industry and receive competitive funding, here are three key pieces behind every real estate investment.
Discover the Optimal Loan Term
Every financing option comes with a term. The loan term will determine how long you’ll be paying back your loan. There are two basic types of loan terms to be familiar with. The first is a traditional amortized loan. Private loans and residential mortgages use this fixed payment method to repay debts. However, commercial loans can also have a balloon loan term. Under these conditions, you’ll still pay a fixed set of monthly payments for a predetermined amount of time, usually 10 years. Then, you’ll need to repay the rest of the debt in full. Balloon loans aren’t designed to repay the debt completely through monthly installments, so you’ll need to save up additional cash throughout the loan term.
Choose Low Interest Rates
Interest rates are the most familiar part of a commercial mortgage. This is the rate that you’re loan will grow, depending on a number of factors. Typically, having a great credit score, large down payment and short loan term can dramatically reduce your interest rates. There are many other factors involved, including the type of commercial property you’re looking to buy.
Research Closing Fees
An often missed piece of every commercial real estate loan is additional fees. These fees can range dramatically. Be sure you fully understand all the fees involved before closing on your commercial property. Generally, you’ll have to pay a fee for the loan application, appraisal and inspection of the property, title insurance and various legal expenses. All of these closing fees can add up to 2 percent of the total cost, so be sure to budget wisely and shop around for loans with affordable closing fees.
These three pieces come together to create a picture of your commercial real estate loan. While you shop for the greatest deals, be sure to ask about each of these areas and compare them carefully. Only then will you be able to enjoy a competitive loan with great rates for your new business venture. Give us a call to discuss your commercial real estate investment needs.