Embarking on a commercial property loan is a business adventure, and like most adventures, it is filled with a lot of unknowns. If it’s your first time buying commercial property, consulting a CPA or financial firm is never a bad idea – after all, this is your livelihood you’re discussing. Although it’s tempting to buy the first commercial property you really fall in love with (And nobody is saying you shouldn’t) there are some definite non-negotiable matters you need to come to terms with (to yourself, and maybe others). Remember, a loan is a commitment, and while you can always resell, it is better to not make a commitment that doesn’t work for you from the beginning. Remember there’s a perfect situation and commercial property out there for you – patience is key! Ultimately, your lender and your credit history is going to be key, but three other factors are highly important when choosing “The one”.
Three Things To Consider When Getting A Commercial Property Loan
- Your Timeframe
- Interest Rate Terms
- The Actual Nature of The Property
It’s extremely helpful if you can consult with a project manager to get an accurate timeframe on how long it’s going to be from the time you secure your commercial building until the time it starts to bring you cashflow. This could be weeks, months, or even years – and it could make or break or your success, so be realistic. Short term bridge loans are possible while you add on/fix up properties that have several tenants but your dream is to upgrade the property, take on more tenants, and make more revenue. You must consider short term and long term goals – and with them, the loans that best suit those desires.
Interest rates aren’t always in your control, but here’s where your credit history comes into big time play. If you need help with fixing your credit, find a reputable lawyer or agency to do that. You have to consider what you really need – the more flexibility you have with your loan, the more interest you are going to pay, but it may be worth it depending on your business venture.
Finally, the actual nature of the property can’t be overlooked. Some lenders consider certain types of commercial business more financially risky – such as a bar or club. Some lenders may have catastrophic or environmental concerns about gas stations truck stops, while other institutions don’t consider these things a big deal. In general, office space, apartment buildings, daycares etc. are looked at low-risk investments – they generally already have established tenants and they aren’t likely to be in an environmental disaster or victim of other catastrophic events. Your particular commercial interest will be a huge player in how and where you secure a commercial property loan.
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