Commercial Real Estate Financing
The term “commercial real estate finance” encompasses explanations and descriptions of the many ways that real estate investors obtain capital to acquire income producing property such as apartment buildings, shopping centers industrial properties and hotels.
Income property investors usually reach out to their transaction brokers or mortgage brokers for assistance. Many factors come into play when qualifying for income property loans such as credit reports, asset, and income verification, appraisals and title searches. Each transaction will have its own unique scenario to address.
Benefits of Using Financing When Investing in Real Estate Income Property
Real estate financing provides capital leverage that when added to your down payment provides the purchaser funding to acquire larger properties. With a down payment of 30 % the purchase price and real estate financing of 70 % the buyer receives 100% of the cash flow less mortgage payments and 100 % of tax benefits and property value growth.
Some of the main benefits of using financing as an investor are:
- Potential risk reduction by spreading your funds across several properties as opposed to one.
- 100% ownership of an income producing property for a reasonable down payment.
- The capacity to lower taxable net income by deducting interest expense and depreciation.
- Increased returns on investment thanks to the use of leverage to finance the acquisition.
Different Ways to Finance Commercial Real Estate
There are a many options to consider for financing income producing real estate:
Banks, insurance companies, credit unions, and savings and loans provide conventional loans for all types of income producing real estate.
FNMA, Freddic Mac and FHA Financing
These government sponsored agencies are excellent options for financing multi-family apartment properties.
If you are a new or experienced income property investor financial challenges are usually encountered during the real estate investment process. These challenges can be usually overcome by investors with the guidance and assistance from knowledgeable transaction and mortgage brokers.