Ways To Finance Your Commercial Real Estate Purchases | Red ...

U.S. ? (realtybiznews.com) Commercial real estate investing can truly be a lucrative business, but before you decide how to finance your purchase, you need to know what you are planning to do with the property. In other words, your exit strategy will determine how you?ll want to finance the property.

If you?re planning on holding the property for a short while like a fix and flip scenario, then you want to obtain a loan that has the lowest up front fees. The interest rate and payments on the loan aren?t that important because you, hopefully, will be selling the property quickly.

If you plan on keeping the property in your inventory for a substantial period of time, like a fix and hold scenario, then you would normally trade paying higher up front fees for a lower interest rate and payments. Over the course of the loan those lower payments will save you much more money then whatever up front fee you may have paid to get the rate.

Once you have determined your loan priorities, then it?s time to go loan shopping. Here are some places you will want to look.

Traditional Lenders
The lending requirements for a commercial loan are significantly different from a residential loan. In commercial lending the properties loan worthiness is determined more by it?s income and expenses than it?s actual physical condition or location. Commercial lenders look at a property in terms of it?s ability to produce income to support its expenses and financing.

A traditional lender will want to see the income and expense statements for the property for the past three to five years. They will also want to determine what the NOI (Net Operating Income) for the property is. All of this is done to determine if the property is a sound financial investment. Once they determine if this is true, then they will look at the condition and use of the property as well as the financial and credit status of the borrower and make a final lending decision.

Non-Traditional Lender?

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Source: http://www.rednews.com/index.php/2012/09/ways-to-finance-your-commercial-real-estate-purchases/

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