Many predict 2015 will be the US economy’s strongest year in quite some time, even as the global economy slows, according to the National Association of Realtors. It’s an exciting to be in real estate as prices and interest have become favorable to investors. For example, interest rates are predicted to be 3.5% for five year terms and as low as 4.5% for 20 year fixed terms. It’s profitable and with an improving market, can only get better. Commercial real estate loans are a great way finance your projects.
Commercial real estate property is property used solely for business purposes. Such properties include retail centers, apartment buildings, and office complexes. You generally finance these properties through commercial real estate loans, that is through liens on a commercial as opposed to residential property. They are also known as commercial mortgage backed securities (CMBS), and are commercial backed properties as opposed to residential real estate.
However, investors who know the risks of investing in a commercial real estate market that is still somewhat volatile also recognize that securing CMBS’s has become more difficult in recent years. There are some ways to ensure the process is smoother and easier.
Firstly, know what you bring to the table, and make sure everyone involved knows the value you can add to the project and application. This is especially true when you’re looking into refinancing loans. Make sure you have the capital, the expertise and market knowledge to make your application appealing.
This may sound like a no brainer, but do make sure not to misrepresent anything in your application. If the underwriter finds it, it could potentially turn into an issue that could derail your application and get it denied. On the other hand, if you’ve already disclosed potential issues, the underwriter can find work arounds.
Lastly, know your market, and have good market knowledge. Knowing going mortgage rates, the best ways of financing commercial estate, and how to find a good commercial real estate broker are crucial. Local lenders are willing to take risks in their communities as they benefit from good investments directly. Commercial real estate loans do not come easily, so know how you best present your application and apply intelligently.
Commercial real estate banking is strong. By 2017, $1.4 trillion is expected to mature, and a fourth of of that is in CMBS’s. An estimated $1.4 trillion in commercial real estate loans are expected to mature by 2017, and a fourth of that will be in CMBS loans. Financing your commercial real estate adventures requires a little more well worth leg work. Getting commercial real estate loans can be an enormous benefit to your portfolio or business, but as these loans are more difficult to get, it’s imperative you have everything together.
What are some of your financial real estate do’s and dont’s?