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Is A Commercial Loan Right For You?

Jun 24, 2008
Are you considering a commercial real estate loan to fund your next investment property? Commercial loans are very popular today because of the high return on your investment. Investment properties are appreciating at around 10% per year. In rare cases, you can even find properties that double their value ever 5 to 6 years. Commercial loan interest rates run anywhere from about 11% to 17%, so you can clearly see that the appreciation of the property offsets the high interest rates that you encounter with a commercial loan.

If you are new to the real estate investing venture, I am sure that you have a few questions. I will address some of the most common questions with their answers to try and help you understand if a commercial real estate loan is for you.

First, you might ask, what are the advantages of these types of loans? They offer fixed interest rates that are locked in for the life of the loan. You can obtain one of these loans to create an organization, or build your current organization bigger and better. You can also use these loans as a way to refinance an existing property.

When it comes to options, you have a few. You can either obtain a hard money loan, a conventional loan, or a government regulated guaranteed accommodation. Just like personal real estate loans, you can borrow up to 80% of the loan to value of the property. You should expect that you will earn back your investment in about 10-40 months.

Second, you might ask, what types of loans are there for commercial purposes? There are privately funded loans, also known as hard money loans. These types of loans are usually easier to get but have a much higher interest rate. There are also conventional loans and government backed loans. Each of these offer much lower rates, but are more difficult to obtain.

Last, you might ask, what are the tax benefits of owning a commercial investment property? When real estate appreciates, or increases in its value, you can refinance and take the cash out to roll into other properties or assets. If you do this, you will not be taxed on the amount your property appreciates. Any of the money you use for personal expenses, must be taxed by law.

Obtaining a commercial loan is like fitting the pieces of a puzzle together. If you have the right loan officer and sellers, your experience can be pleasant and very rewarding.
About the Author
Bart Icles is an expert when it comes to commercial real estate loans, hotel loans, and apartment loans. Visit National Commercial Funding today for more information or to get started! You can also check out poor credit student loans if you are in need of a student loan.
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