For many people who fantasize about of owning their own business, having commercial real estate space is part of living the dream. There are always practical sides to consider, however. It is important for any potential investor to understand commercial real estate loans. CRE loans can be given to buyers of commercial properties.
Owners of commercial property have several options. Good money can be earned by acting as landlord to existing businesses needing space. Supporting businesses an owner believes in is a very positive experience. A property owner can also choose to occupy the space and do business there. Borrowing money can make the initial purchase of a building possible. Here is an explanation of how these loans work.
Who Gives CRE Loans?
It is often assumed that the majority of loans come from banks. The truth is, when it comes to some real estate loans, banks only deal with very established clients and their loans also carry a great deal of red tape and other restrictions. The fact that bank loans are not ideal for new investors is not a problem, however. Many more outside lenders work in independent firms and they handle the bulk of commercial real estate loans in the current economy. These lenders are just as experienced at assisting buyers in making financing deals they need most.
Hard Money CRE Loans and Their Terms
For first-time buyers, the most important loan to know about is the hard money loan. These loans are the type given by private individuals or lending firms. These loans have fast turnaround time and much simpler application processes.
Loans may also have different features and rates depending on the agreements reached with a lender. A loan will never cover the full cost of a newly-acquired property, but it may cover up to 65 percent of the investment total. All new ventures require a level of commitment from the buyer. This demonstrates that the lender is also making positive investment choices in backing the project.
Focus on What Matters
With access to the funds to make a CRE investment a reality, it is possible to focus on what matters. Investment properties can simply help further financial aims while allowing focus on personal goals, or the buyer can focus on running their new business in the space. A lending partner can enable commercial real estate investors to do more.
The Bottom Line
CRE loans are a worthwhile investment. Many options open to owners of commercial real estate. Understanding how they work is critical to putting them to good use.