With prices for residential housing continuing its upwards trend, some investors are beginning to take serious interest in acquiring commercial properties as a way to continue expanding their real estate investment portfolios. Investors who are relatively new to the process of buying commercial properties can use the following information to become more knowledgeable about some of private commercial loan types they may encounter.
Hard money loans
Commercial real estate loans meant to be used for a short period of time and funded by private lenders are referred to as hard money loans. Hard money loans typically serve as bridge loans to help investors move forward with a purchase while awaiting funds from a property sale or other source.
Because they are private, hard money lenders are more able to offer flexible terms. For example, investors with unique circumstances or properties may find hard money loans preferable to more structured financing options with more stringent lending guidelines. Real estate investors, however, will want to fully understand that they risk losing their collateral when taking out a hard money loan, should they be forced to default.
Another form of private loan that can be used for commercial lending purposes is the peer-to-peer loan. While these loans have some similarities to hard money loans, a major difference involves the extended amortization schedules they offer, even though the loan term remains relatively short, usually just a few years.
Peer-to-peer loans can often work when the property being purchased has condition issues that make many traditional commercial loan options unavailable.
Real estate investors who want to buy a commercial property with plans of using a portion of it for their business and leasing the remainder may wish to explore owner-occupied financing.
In addition to using owner-occupied loan options to purchase a business or retail space, real estate investors can utilize this type of financing to purchase an apartment or multifamily property, as long as they intend to reside in one of the units.
Private lenders who offer owner-occupied financing options can specify the length of time the borrower will need to reside in the property as part of the loan terms.
Using private loan options like these or others can help investors more easily enter the commercial real estate market. To learn more about the commercial real estate market and begin looking at available commercial properties for sale, contact a reputable commercial real estate agent or broker in your area.Share