For someone just starting out with commercial property investing, it might seem a daunting task to secure the necessary financing for a specific transaction. However, there really are a number of different financing strategies available to investors, and it is worthwhile considering all these potential options to find one that fits your circumstances.
Hard Money Lenders
These are professional lenders of capital who tend to focus more on equity than on the creditworthiness of the borrower. The big difference between hard money lenders and private lenders is that hard money lenders are obliged to follow more formalities and regulations, and that means you as a borrower will also be obliged to go through these requirements.
Private Money Lenders
You can generally get the most favorable terms from private money lenders, since they will be comprised of family, friends, and associates. The network of contacts you’ve made while getting into the commercial real estate business will come in handy when it comes time to try to finance your next real estate transaction. There will almost always be fewer formalities associated with private money lending, and generally lower interest rates as well.
This is one of the most tried-and-true methods of financing commercial property transactions, but the downside is that most banks will require something like a 20% down payment of the overall value of the property. It might be possible to find a bank which requires a lower down payment, but that will generally be a local bank that knows and trust you.
Rather than lending you the money themselves, mortgage brokers will work with you to find investors who might be interested in your project. Naturally, a mortgage broker will require a commission for their services rendered, and this is a fee that you will have to add on to the cost of your real estate transaction when it comes time to close the deal.
Need financing for your commercial property investment?
If so, we may be able to provide the funding you need. Contact us at Evolt Capital so we can consider some possibilities for financing your next big real estate transaction.