The Cons of Having Commercial Mortgages and How to Avoid Them

4page_img4Even in today’s technological world of internet-based companies, there is still a vast need for brick and mortar businesses. When it comes time to obtain commercial mortgages on building for your company, it’s important to be aware of some of the risks and downsides, so you can try to avoid these pitfalls.

Finding a “home” for your business is a thrilling part of any new or growing business. The location, the building itself and many other factors go into how you will select the property you decide upon. And when you finally move from being a renter to an owner… that is a very unique feeling. However, even if you have a popular product or successful business, there are some things you need to consider when it comes to purchasing property and taking on commercial mortgages for your company.

First of all you will be responsible for more than just your monthly mortgage on your new property. You will likely be responsible for a sum of the property upon initial purchase. For many small businesses, coming up with the cash to front this initial down payment can really put a crimp in their budgets. Typically, about a fifth of the value of the property will be required of you as the business owner.

In addition to your usual business costs, there will also be plenty of other additional expenses associated with your new commercial mortgages. These expenditures can come in to the form of marketing your new brick and mortar store or new location. You also may need to hire more people, which means your payroll just went up.

Sometimes just renting is the way to go as opposed to owning and having commercial mortgages.

As a renter, you are typically not responsible for much more of a down payment beyond the first and last month’s rent. As a renter you may also have the benefit of having a property manager to fix and repair building issues that as a building owner, you would be financially responsible for. There is some additional risk associated with ownership in the case of a natural disaster that could potentially put you out of business for some time as you fix the issues and eat the cost of any inventory lost as a result.

A final “downside” to owning a property versus renting is the commitment that you might not be able to get out of.

Once you purchase a property via a loan, it’s yours and you have to commit to repaying that loan for as long as the terms specify. Even if your company hits a slow patch or even goes out of business, you are responsible for paying the mortgage on that property. While you can try to sell the property, that can take time and you may not be able to get the value of the property that you need to be able to repay the loan. While there are some “cons” to consider, there are also many benefits of owning your own property, such as earning equity. Weigh your options before deciding to take on a mortgage for your business, or just rent.


Dennis Dahlberg
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177 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.

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