Investing in commercial real estate can be an expensive venture and will require help from your bank or financial institution to pay for. What type of loan you receive will depend on what you plan to use the land and structures for and if you will share the space with your tenants or if they will live there full time. Here are a few options to consider while planning your purchase.
Residential Property Loans
You can obtain residential property financing even though you plan to make a profit on the home you are wanting to purchase. This would apply to rentals and vacation homes that you might live in yourself as well as rent out to others. If you plan to have an Airbnb, this would be an option for you. You will need to have a good credit rating to apply for the loan for this commercial real estate. This financing will be the normal length of a typical home loan you would get if you were asking for money for the home you lived in. When you decide to move forward with this plan, contact your financial advisor to see if this loan will work for your situation.
Commercial Property Loans
If you want to lease out apartments or homes to others, or you want to offer commercial real estate to businesses, you must have a commercial property loan. Along with a great credit rating, you must present a business plan to your bank to acquire this financing. They might also ask for financial records in the event that you already own property or businesses to ensure that those investments are successful and there is enough cash flow to warrant a new venture for you. The financing company will want to know what you plan to do with the property and the company you will manage. They might also require a down payment or collateral before they award the money to you. The loan that you receive will be far shorter in duration than a residential property loan, much like most financing you would receive for a business.
Type of Commercial Loans
When you apply for a loan on your commercial real estate, you can opt to work with your bank or a private lender. While it may be more difficult to get financing from the bank, you will spend less money in payments. A private lender will charge more in interest for the loan they give, but will be more flexible with you and have more financing options for you to work with.