29 Dec Getting started in commercial property investments
Commercial property investments can generate a steady flow of income for the wise investor. If you are considering becoming a commercial property investor but really are not sure where to begin, here are a few basics as a starting point.
Types of commercial investment properties
The right kind of commercial property investment can offer many benefits. Some types of commercial investment properties to consider include industrial spaces, retail and office spaces, rental apartments (apartments buildings, duplexes, condos) and warehouses.
When considering the best type of commercial property to begin investing in, consider your financial goals. Are you looking for a cash-flow property where you will have to extend minimal maintenance on improvements? If so, a more passive strategy, such as purchasing an already renovated commercial space to tenants, might be a good bet. On the other hand, if you are looking to acquire low, add value and sell for more, renovating rental units could be a wise investment choice.
Financing for commercial property investments
Once you’ve decided on the right commercial property investment, you’ll need to begin the financing process for purchasing the property. The requirements for commercial property financing are a bit more stringent than those for purchasing a residential property. The lender will consider several factors when approving you for a commercial loan including your creditworthiness, ability to repay the loan and any collateral you have to offer up as a loan security.
Commercial lenders generally look at the cash flow the property will produce, and most have a general rule that the operating income must exceed the mortgage note on the property loan by 25 to 45 percent. Having liquid assets such as money in the bank and security investments can also help you get approved for a commercial loan. The Small Business Administration (SBA) guarantees commercial real estate loans for SBA-approved lenders. Here are some tips from the SBAon getting approved for a commercial loan.
Barsh & Cohen is a specialty law firm with a professional legal team specializing in all legal aspects of real estate. We can handle all your commercial property closings efficiently and at a reasonable cost. Contact us for a consultation.