3 Types of Commercial Real Estate Loans for Investors
Buying real estate is a big commitment, even if you only intend to hold it for a short time. Since there are so many reasons why investors and businesses buy commercial properties, there are also a lot of loans out there, a variety built to suit each business model in the industry. Putting aside the ones aimed at developers and businesses looking for facilities, there are three key loan types to keep in mind when considering a property investment.
1. Commercial Mortgages
This is the most common and most widely understood type of commercial real estate loan, and it is a good fit for investors who purchase long-term income properties because it offers a stable, low monthly payment that allows you to cover the bulk of the building’s costs from its rental income. That suits multi-storefront commercial properties and apartment buildings especially well because the mortgage costs are typically covered by just a fraction of the total tenant capacity.
2. Asset-Based Working Capital Loans
It does not matter if you call these loan packages by their technical name or you rebrand them as bridge loans, flipping loans, or another title. Short-term loans that allow you to finance a property while making interest-only payments until the final principal payoff come in a lot of packages but they all do essentially the same thing. They get you working capital for up to three years, allowing you to do what you need with it. Commercial real estate loans in this category can be used to finance new purchases, but they are frequently also used to finance working capital using an asset you already own.
3. Stated Income Loans
Investors looking to use a stabilized income property to finance their next acquisition will find that stated income loans are built for just that purpose. They are valued against the building’s earning power instead of its market value, but they are still secured to the asset. That means a default could potentially cost you the building, but since they are attached to buildings that are earning for you, they should be low risk. These loans are cash-out financing, so they can be used for anything, including the purchase or renovation of another property.
Choose Wisely When You Invest
Since commercial real estate financing is based on the strategy you’re choosing when you invest, it should be easy to find the right fit for your next move. Just take your time and shop for the program that makes the best use of your existing capital and assets.
At Brightview Commercial Capital, we have different financing options for businesses, including commercial real estate financing. These solutions can support your commercial real estate transactions, whether they’re very large or relatively small. Contact us today to learn more.