There are several reasons why individuals decide to take the plunge into investing in commercial real estate, and there is often one reason why they drag their feet—finding commercial lending. Let’s look at why CRE is an excellent choice for many and how alternative lenders are creating opportunities for first time investors.
A good return on investment (ROI) motivates many to get into CRE. Though returns dramatically vary, a general average lies in the 6 to 12 percent range. This is because rents, whether multifamily, office or industrial, either involve several units (resulting in multiple streams of income) or warrant much higher rents than a typical single-family home.
Commercial real estate offers more security in that vacancy rates tend to be lower and they are not as reliant on comparable sales when it comes to valuation. Leases for single-family homes are usually anywhere from six months to one year whereas commercial rentals can have terms that range from five to twenty years and longer.
Single family homes rarely come with a professional manager whereas managers and apartments go hand-in-hand. If you do not have space for a live-on-site manager, there are professional management companies that specialize in these types of buildings. If you find and start with the right tenants, a CRE investment may require very little hands-on management.
Location is Crucial with CRE
It does take a little more research on your part before delving into CRE. There are several distinct types of investments with each carrying their own pros and cons and due diligence list. Offices are best in a strong economy and in markets with a good labor pool to draw from and in-demand leasing space. Warehouses and distribution centers require centralized locations with easy access to key infrastructure. Maintaining high occupancy and rental rates in an apartment building are accomplished if the building is in a high-demand area as well as a strong job market. Buildings near collages are considered top investments, but even those require additional considerations such as high-turnover rates and the potential of increased vacancies during the summer months.
Funding is often the obstacle that keeps investors from moving forward into the CRE segment. At Level 4 Funding, we work with hundred of private investors, one of which may very well specialize in your segment of commercial lending and real estate.
Because traditional commercial lending requires a few years of financials and experience in the specific CRE market, getting started in the business can be challenging. It is also common for commercial lending institutions to require a down payment of 20 to 25 percent. Alternative lenders are not bound by the same restrictions. Because of this, they can offer find a way to fund a commercial real estate property when other sources have been unable to provide the needed capital. Call us and see if we have the capital you require to move forward with your dream. We offer hard money construction, bridge, office, warehouse and multifamily unit loans with terms from 3 to 60 months.
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.