There are various types of commercial real estate loans that will help you get into this burgeoning sector of investment strategies. Learn about bridge loans, joint venture and hard money loans.
Commercial property is, simply put, property that produces income. It can be just about anything including, but not limited to, industrial, office, hospitality, medical and amusement. According to Statista, the value of total commercial construction starts in the United States amounted to 18.66 billion U.S. dollars—and that was just the first half of 2017. Yet only 8 percent of Americans own investment properties and only 7 percent of those investors put down more than 50 percent when purchasing properties. Here are just a few of the many ways you can access lenders in order to obtain your commercial real estate loan.
A bridge loan supplies needed cash, allowing an investor to keep their current asset while purchasing the next. It is commonly used to finance initial construction or put money down on a project while awaiting more traditional forms of lending. These are short-term loans, usually 3 to 12 months that provide immediate cash flow. Hard money lenders usually offer these types of “fast cash” loans. Hard money loans are also short-term loans, though they can often be extended for up to 5 years. They require collateral and lenders are more concerned with the value of the property than with the borrower’s credit score. They do require a business plan and an exit strategy.
Joint venture financing is, in essence, taking on a partner for a specific project. In this type of commercial real estate loan, parties share in costs, profits and losses. This type of loan can be complicated and requires understanding in the following areas: the type of entity the joint venture will be such as an LLC, the responsibilities of each party in the day-to-day operations, the equity stake each partner holds and an exit strategy. It’s important to understand that, ultimately, you are taking on a partner who will have a say in the development of your—and your investor’s—project.
Compatibility issues as well as differing opinions have derailed many a joint venture, making it important to establish trust and good lines of communication in the early stages. Many choose this option when expanding into new territory, and smaller projects may undertake a joint venture agreement in order to participate in larger projects and have access to their now partner’s technology or resources.
How to Determine the Best Commercial Real Estate Loan for Your Business
If you need a partner for their expertise and resources, a joint venture may be your best option. Make sure they compliment your skills and experience and have a good track record. If you need immediate funds to get your project started while you wait the month or more for traditional funding, a bridge loan may be your answer. For those real estate investors that require immediate financing, have a strategic business plan and exit plan in place, and for others looking to do a quick flip, a hard money loan may be your best choice. This is also a good alternative for those with credit issues.
“Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did.”
If you’d like help determining the best type of loan for your next or first project, call us at Level 4 Funding. We are happy to share our years of experience and the knowledge we’ve gained in order to help you get stated in this type of investment strategy.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.