Investing in commercial real estate is a great way to increase your income and create a sustainable business in the long-term. However, to buy those commercial properties, you’ll need to secure financing. For most buyers, this means taking out real estate loans and those loans aren’t always the easiest things to get. Though there are many lenders out there, they all offer similar loan options to help you achieve the financing you’re looking for. Before you apply, there are a few things you need to know.
Banks Are Still the Best Place To Start
Traditional lenders like larger banks are still the best place to start looking for financing and the larger they are, the easier it will be for you to get a loan. This is because large banks have the ability to make larger loans without hurting their bottom line. They’re able to be more flexible in their requirements and are more likely to offer loans to borrowers that might not qualify with smaller lenders. If you’re considering applying, shopping around is still the best thing you can do. Compare the rates each lender offers you and go with the company that you’re most comfortable working with.
Alternative Lenders Can Fill in the Blanks
Not every borrower will be able to get a loan from a traditional lender. That’s where alternative lenders can help out. These alternative lenders are typically private individuals or small companies rather than banks and financial institutions. They offer large loans with shorter repayment terms and require that you use the building you’re buying as collateral. If you can’t repay the loan in full, they can seize the property and sell it to settle your debt. Most borrowers then refinance the loans from alternative lenders to get a better, more long-term loan from a traditional lender after they build some equity in the building itself.
The Two Are Competing in Your Favor
Traditional lenders and alternative lenders are essentially competing for your applications. This is a good thing for people looking to invest in commercial real estate. More competition means better loan terms and fairer interest rates on the loans you end up taking out.
The better the interest rates and loan terms are, the less money you’ll end up spending on interest over the life of the loan. Depending on the size of your loan, this could save you thousands of dollars!
If you’re looking to get started in commercial real estate investing, familiarize yourself with your loan options. This way, you’ll get the financing you need with terms you agree with.