Commercial Loans – The Good and the Bad

Commercial Loans – The Good and the Bad


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Commercial Loans – The Good and the Bad

We have been rocking and rolling in real estate for a few years now and have finally ventured into commercial properties as well as rentals. This has been an exciting adventure and we have yet to find a property that doesn’t teach us something that we didn’t know. With real estate, you will never know everything and real estate is quick to educate you on what you don’t know!

The Good of Commercial Loans

Commercial loans, just like any real estate loan, are great. They allow the purchase of an asset for a fraction of the price through leverage and collateral. The loan is secured through the property itself via a promissory note and mortgage. Insurance is also purchases to protect the parties involved in the transaction.

Some of the loans that we looked at recently showed rates between 6-12% APR. Now before you say that those rates are a ripoff, look at what you are purchasing with such a loan. It is a commercial asset that usually requires at least 20% down. There is room for protection on the lenders side and money to be made through the higher interest rate. The rates are higher when you buy a property as an investment where you don’t plan on living in it or using it for your personal business. The property in question that we are purchasing is a rental, so the terms are higher than if we bought it for our use.

The Bad of Commercial Loans

The property that we are purchasing is one that was listed previously and fell out of contract, becoming an off-market lead. We were told that the previous buyer had pushed back closing several times due to financing problems, a problem that we quickly learned once we started our search for lenders.

What we found is that with commercial, lenders typically have a minimum loan amount that they will cover. Our property was quite a bit below the minimums (the lowest we found was $200,000). That left us wondering where we would find a lender!

We found two that were willing to work with us. One option that we found was using a hard money lender on a short note and paying interest only until the note was refinanced. Sounds like a bad loan with no principal being paid down, but we plan on refinancing in the short-term anyways, so it works. The other lender that we found was a local and willing to do a commercial loan at the price, but we are still awaiting word on the details of the loan itself.

So the bad is really a matter of money and how much capital you need up front in addition to higher interest rates.

Yet even with all this, the deal is still a deal! We have a tenant in tow and plans on paying that loan of very quickly through other investments. It all starts with one property! You have to get the first before you can get the second, so here we are informing you on what to look out for when (if) you jump into commercial properties!

Contact Us!

We can be reached at (850) 710-0710 or by email at management@sonnysidepropertysolutions.com. Sonny Side Property Solutions is here to help everyone with their real estate needs, especially homeowners that need help now! We are here to serve the community and provide real estate solutions for any situation and we have a national network of investors and brokers that we work with and can call on at any time.

We can be reached by phone at (850) 710-0710 or by email at management@sonnysidepropertysolutions.com.

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