Commercial Real Estate Funding for Investment Properties
Investing in real estate is a great way to round out a portfolio and diversify your company’s reserve wealth. Investment properties owned by businesses are different from the commercial real estate you buy to use as facilities because the fact that you do not occupy the premises changes the financing available to help with your purchase. If you’re looking to purchase commercial properties for improvement or long-term income so your company can develop additional income streams, you need to know how to navigate real estate financing for investments.
Short-Term Loans for Renovations or Resellers
Speculation and wholesaling are two ways to put your company’s wealth to work in real estate, but turning properties so they are ready for new tenants or owners can accelerate the process and increase your margins. Instead of hunting down an investor or holding the lot until its value appreciates, a little extra capital can increase its immediate market value, allowing you to sell it at a profit within months.
Bridge financing that uses the property as collateral is a good choice for funding the purchase. Payments are generally interest-only until the loan matures, allowing you to minimize your overhead capital costs and focus on your investment exit goals when buying commercial real estate. There are a variety of programs aimed at everything from using an existing property’s value to finance your purchase to specific loan packages aimed at those flipping single-family dwellings.
Stated Income Loans
When you’re buying or holding income properties, stated income loans give you an alternative model for financing by letting you value the loan based on the actual income of the property and not the resale value. The property is still used as collateral for the loan, but the loan-to-value ratio is based on your earnings, which lets you use cash-out financing for real estate acquisitions, potentially funding both the purchase and any improvement costs. If you plan on holding the property for rental income and it’s already earning, you could even use the new purchase as collateral.
Commercial Real Estate Mortgages
Traditional real estate loans with decade-plus terms, amortizing payments, and fixed interest rates are just as popular for those acquiring income property as it is for companies looking to fund facilities. They are not suitable for short-term acquisitions because of the sizable down payments and long closing times, but they provide an affordable way to finance any long-term income property investment.
Keep your investment exit goals in mind as you look for opportunities, and before you know it, you will have created additional passive income for your business just by reinvesting reserve capital in a place where you can still access it as needed through refinancing or resale.