Many traditional mortgage products require you to live on the property you are purchasing. While this requirement is not a problem when purchasing a home, it can be a serious problem when looking to invest in commercial real estate. Thankfully, there are many options available to help you get the financing you require to purchase this commercial property. Below, you can learn more about these commercial financing options.
Commercial Mortgage Loans
Just because many traditional mortgage products are designed for residential purchases, it does not mean that obtaining a mortgage is completely out of the question. In fact, more and more financial institutions are now offering mortgage products specifically for use in purchasing commercial properties. The main difference between these commercial mortgages and the residential mortgages you may be used to dealing with, is the fact that commercial mortgages use a very different set of criteria to determine the value of the property that you wish to purchase.
The value of commercial property is greatly dependent on the amount of usable square footage that it provides. Consequently, you may find that the value assessment performed by your mortgage lender does not match up with the current asking price of the property. In this situation, you will need to provide a large down payment in order to secure the purchase of the property.
Financial institutions are not the only source of funding when purchasing commercial property. In fact, there are many private investors that are consistently looking to invest in commercial real estate deals. In many cases, these private investors will be part of what is known as an investment firm.
The benefits of turning to private investors for the cash you need include less stringent credit requirements and lower down payments. However, in return for these benefits, you may be expected to pay a higher interest rate. In order to ensure you are choosing the most beneficial financing option, you will need to consider not only the upfront cost of the loan, but the full cost of the loan over its lifetime. This includes any balloon payments that you may be required to pay when the loan reaches maturity.
Financing the purchase of commercial real estate can be a complex process. In order to ensure you are able to navigate this process, while also protecting the financial stability of your business, it is always best to consult with a commercial real estate agent, like at NAI Norris Beggs & Simpson, and an attorney prior to signing any loan documents.