Commercial Real Estate Loans require a few key things to make everything happen seamlessly. Ultimately this means having available funds to put down and having a clear business plan.
In the wonderful world of real estate, commercial real estate loans don’t always come easy. In fact, the better prepared you are for your lender the better the chances are that you will qualify for your commercial loans. Obviously, this is not groundbreaking advice –being prepared. But, it is can be very easy to forget that the devil is always in the details, especially when it comes to qualifying for commercial real estate loan.
For instance, money down or rather a down payment can open many doors in the commercial real estate world. But, of course, you can’t just bring any sum of money to the table. In fact, you actually need to hammer out a few details before you can even come up with the right figure amount for your down payment such as property type, your LTV (Loan to Value) ratio, your income-generating capacity, available collateral as well as personal guarantee, fees, terms, repayment schedule, loan type i.e. small business loan or non-small business loan and so on. The point is it takes time, extensive planning as well as a good calculator to know how much money down is right for you and your business venture.
If you are suddenly feeling a little fearful of math, it’s perfectly naturally to feel a little overwhelmed when trying to figure your future down payment. The good news is that there is help. So, put your calculator down and take a deep breath—your real estate loan is only a day away, well actually a few business days away, but nevertheless.
Let’s go over a few key things, your LTV ratio ultimately looks at the amount of your loan in light of the appraised value of your property. Your specific lender can quickly tell you what they typically require here, but generally, most banks or lenders look for an LTV around 70-80 percent or less. So if the LTV ratio is 75 percent then the loan will cover 75 percent of the purchase price and you need to come up with 25 percent down. If your property will be an income-generating one, make sure you factor that in as well. Other things such as available collateral or personal guarantee are typically not an issue for business to come up with; thus, you need not lose any sleep over them. Clearly, fees, costs, terms will be covered in detail by your lender and will ultimately give you an idea of what additional capital you may need.
Lastly, it almost goes without saying that one way to get your foot in the commercial real estate door is to have a clear business plan that ultimately details how you are going to turn a sizable profit. In doing so, things like your personal net worth, credit score, and even available collateral will become less of a priority for your commercial real estate lender.
Dennis Dahlberg Broker/RI/CEO/MLO
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.