Commercial real estate financing
Commercial real estate financing is vastly different from residential real estate financing. You will need to have a solid financial background before getting a commercial real estate loan. The financing is usually obtained from a bank, unlike residential real estate financing.
If you are thinking of investing in commercial real estate and applying for financing at your local bank, you will need to consider the following:
- 1. Have a solid financial background and an established credit history. Banks are traditionally more conservative lenders than mortgage lenders and it is important to have good credit;
2. If applying as a corporation, have an accountant prepare a financial statement for the business. If applying as an individual, have proof of assets and liabilities;
3. Have a written business plan regarding the use of the property that you wish to purchase;
4. If you are planning on building on the property, have a Contractor Sworn Statement prepared on how much the development is going to cost. If the property is undeveloped and needs improvements such as roads, sewers and utilities, have an Engineering report on the costs.
5. Be aware that you will have to invest about fifty percent of your own money when applying for commercial real estate financing, particularly if this is your first venture;
6. Have any tax returns, bank statements or anything that confirms that you have the money for the investment;
7. If you have a corporation or partnership, make sure you provide the bank with Articles of Corporation and Certificate of Good Standing. Your bank will also want the signature of all of the officers of the corporation or partners in a joint venture or limited partnership.
Applying for commercial real estate financing is much more involved than getting a mortgage. Even if you are planning on purchasing residential property that will be used to lease you will have to provide more of a down payment and provide more documentation. It generally takes longer for a bank to make a decision when approving a commercial real estate loan as well. Do not expect to get your loan in less than a week.
The type of commercial real estate financing you need will depend on what type of real estate property you are purchasing. Having a good relationship with your banker and an established credit history will help you attain financing for your commercial real estate investment.
Commercial real estate investing can be a lucrative way to make your money work for you. While the bottom has pretty much fallen out of the residential real estate market, commercial real estate is thriving. If you take the time to learn the market you can learn how to make a profit in the commercial real estate market.
Applying for commercial real estate financing is not as difficult as you imagine. Lending rates are lower than ever and many banks are eager to get new customers. If you have good credit and have money to invest in property, consider investing in commercial real estate. Your banker will be able to help you when applying for commercial real estate financing.
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