Real Estate Investment 101: Getting Started

Obtaining A Commercial Real Estate Investment Loan

While there are many real estate investors who focus on the residential niche, there are some that prefer to work solely with commercial properties. Commercial property investing can yield an attractive return if it is done properly, but you will have to seek out some type of funding in most cases. Funding commercial property investments can be quite different from other forms of real estate investing where funding is concerned. Take a look at some of the things you will want to know as a commercial real estate investor. 

How long can the long term be with commercial property?

Loan terms with commercial properties tend to be much shorter than what they would be if you were to purchase a house or residential property. According to Investopedia, commercial property loans can have terms as short as five years but up to 20 years. Most lenders are going to lean toward the shorter loan terms because these properties can change in value so rapidly in comparison to regular homes. Naturally, this shorter loan term is going to mean larger payments, and if the loan is amortized, you may be expected to make smaller payments but will have a balloon payment at the end of the term to pay off the loan. 

Do you still have to pay a down payment for a commercial property?

You will still have to make a down payment when you invest in commercial real estate property. You may actually be expected to pay a larger down payment in order to qualify for the loan. The percentage a lender will require as a down payment can vary significantly from place to place, but it is always best to put down as much as possible. The more money you have, the more you can bring down the overall amount to be financed and the better things will look to a lender. 

What will you need to get a commercial real estate investment loan?

Obtaining financing for a commercial property can be a bit different than obtaining financing for a regular property. These properties tend to be far more expensive and far more of a risk to the lender. Therefore, you will have to have excellent credit, good income, and a large down payment, as already noted. In general, a lender will want to make sure that you are the type of borrower who will have no problems making the payments on a loan of this type. 

To learn more about commercial real estate investment loans, consult a resource in your area.