Getting started in the commercial real estate business is easier than you might think. You just need to be able to finance the purchase the right way. Luckily, there are many ways to fund your real estate investment. Here are a few of the best options.
Take Out a Standard Mortgage
The easiest way to buy a house, whether you plan to fix it and flip it or list it as a rental, is to take out a standard mortgage. These loans are issued by banks and lenders and can only be used to buy a property.
The lenders take your entire financial situation into consideration when deciding if you qualify for a loan. These are a few of the factors they’ll use to render a decision:
- Your credit score
- Your current debt level
- Your total income
- Your credit history
You can get pre-qualified for a mortgage loan before you start shopping. This will help you set a budget and makes it easier to determine which homes are in your price range.
Use a Hard Money Loan
Hard money loans are issued by individual or private lenders rather than banks and are typically only used for real estate transactions. Lenders look at the value of the property you’re thinking of buying rather than basing their decision solely on your credit score and financial situation.
If they believe the property will be worth a high dollar amount before, during, or after you finish renovating the property, they will likely issue you a loan. This is because the loan is backed by the property you’re buying. If you default on the loan, the lender can take possession of the property and do with it whatever they see fit.
These loans typically have higher interest rates than traditional mortgages and must be paid off in full in a single lumpsum payment. They’re typically only a good option if you’re confident you can pay the loan off in full. If you don’t, you risk losing the property and all the work you put into it.
Buy with Your Savings
The easiest way to buy commercial real estate is to use the cash you have on-hand. If you have savings, use those to buy property without having to worry about interest rates or high loan fees.
If you don’t have enough cash saved up to pay for the property in full, use the cash you do have to offset the amount you’ll have to borrow. The less you borrow, the smaller your payments will be over the life of the loan.
Financing a commercial real estate purchase is simple. Use one of these great options for your next investment property.