Making Wise Investments in Commercial Real Estate

Real estate secured lending

Are you a first-time home flipper looking for renovation financing? Or have you been investing in real estate and flipping houses for several years? If either of these situations apply, then you’re probably aware that in 2014 alone, 327,069 homes were repossessed. Many of these homes may be in poor condition, so the need for renovation lending is apparent.

While there are a number of reasons to invest in commercial real estate, expanding your business and investment portfolio may be at the top of your list. If you have already been making real estate investments for quite some time, and are looking for real estate investment lenders for a new or ongoing series of projects, you may be interested in knowing more about hard money rehab loans.

First of all, the interest rates are higher with hard money rehab loans. They do, however, have lower loan- to-value ratios. A hard money loan’s interest rate might range from 15%-to-18% or more.

Secondly, there are faster turnaround times with a hard money deal. These may only take one-to-two weeks in order to process.

Thirdly, the payment period is also shorter for a private loan. When comparing these loans with traditional bank loans, private loans extend for up to five years, while a traditional bank loan payment period is from one year up to 20 years.

If you were previously considering a standard bank loan, then you are probably aware that there are several stipulations for this type of loan:

    You need to have been in business for two or more years.
    You need to have a minimum of $250,000 in annual revenue or income.
    You need to have good personal and business credit.
    You need to have a consistent cash flow.

When you apply for secured short term loans, one of the operative terms is “secured.” If you are interested in obtaining a hard money loan, most of them need to be secured by an existing property you own. More specifically, the property you put up to secure your loan will need to have approximately 30%-to-50%.

When you are looking for hard money mortgage lenders, remember to consider the benefits of these types of loans over traditional bank loans.

7 Tips to Help You Get Started in Commercial Real Estate Investing

Hard money lender in florida

Are you looking to change up your investment strategy? Do you own your own home? Have you considered commercial property investing? Whether you have thought about it or not, there are a lot of reasons to invest in commercial real estate. If you are not sure how to get into this area, here are some tips to help get you started.

  1. Commercial real estate investing success relies on planning. People who are not involved in commercial real estate investing look at people who do well and may think, “that person is very lucky.” While that may be true, the simple fact of the matter is that success in this area is really more about property preparation and planning and less about luck. This is one of the commercial real estate investing basics.
  2. Look for areas that are being developed. When you are looking at commercial real estate investing opportunities, it makes a lot of sense to look at up and coming areas and less to established neighborhoods. For example, a decade ago, the Anacostia section of Washington, DC was probably the toughest part of town. Today, it is one of the trendiest parts of town. If you were looking to invest in an area of the nation’s capital and you invested in this part of town, you would be in great shape. Look to these areas that may develop. This is something you can research and you can find trends to give you an idea of what areas may be on the verge of renewal.
  3. Keep an open mind about the kinds of properties you look at. It is easy to look only at retail space for instance but when you have your blinders on, you may miss great opportunities in apartment buildings or office parks. Commercial real estate investing is not limited to one kind of building or business. You may have a preference for what kind of buildings you want when you start the process but do not let that limit your options or blind you to other opportunities.
  4. Go big or go home. Well, not really but if you are looking at apartment buildings, do not limit yourself to smaller buildings, for instance. Whether you are renting to retail tenants, residential tenants or office space, if you have 20 units that are as easy to manage as if you had only 10. The main difference is the amount of money you will make every month. Again, be open to new ideas as you scour the commercial property investing sector for new opportunities.
  5. Get advice from someone “in the know.” If you are new to the world of commercial real estate investing, you should by all means talk to someone who is not. Find someone you trust and see if you can pick their brain about the market and your ideas. Be prepared to get some news you do not like. Do not be offended by that. Just take it in stride and listen to the advice.
  6. Consider taking on a partner or two. The really big deals are not made by one person, for the most part. If you are looking to get started in this, it is a good idea to take your thoughts to someone who is more experienced with commercial property investing and see if they will partner with you. There are a few good reasons to do this. On a human level, you will have someone to talk things over with and vent to. On a more practical level, you may find that you have more access to needed financing or real estate secured lending when you have a partner. Remember, two heads are usually better than one.
  7. Patience is absolutely your friend. You may have bought residential real estate but the process of buying commercial real estate is very different. In the first place, it will take you a whole lot longer to get the commercial property investing deal finished and done than it does to buy a house. If you go into the process with that in mind, you will be much less frustrated and will be more sane when it is over and done.