Real estate investing has always been popular because of its relative stability, especially among established investors or businesses looking to create a secondary income stream as a hedge. The last decade has seen an unprecedented rush to prioritize this kind of investment as a primary business model, allowing many entrepreneurs and investors to break away from day jobs and engage fully with commercial real estate markets in their vicinity.
In part, this is because of the widespread availability of surplus property in the wake of the 2008 market adjustment. It’s also because of the wide range of tools that have been developed to provide investors with options to suit different investment models, though. Today’s financing market is more varied than it ever has been, especially with respect to commercial properties.
Owner-Occupied vs. Investment Properties
If you’re investing in multi-unit residential real estate or you’re looking for facilities to house your operation, you have different options available to you than if you’re investing in an income property or looking to flip the building back onto the market with improvements. For many commercial loans aimed at multi-unit residential properties, the owner’s occupancy is a disqualification.
For most of those properties, though, a mortgage or owner-occupied commercial loan can be found with the right lender, it just takes a search for someone who specializes in financing those property types. Businesses buying facilities to operate out of can also find specialized financing through commercial property loans with amortizing payments and fixed rates or SBA loans designed to help them build a business that lasts decades.
Bridge and Rehabilitation Loans
If you’re fixing the property to return to the market, there are short-term options designed to allow you as much leeway as possible while you put your working capital to use improving the property for resale. These loans are short, with the average term length being 12-18 months and a maximum loan term of 36 months. Their advantage is that these loans are often available for up to 90% of the property’s value, and they also typically require only interest payments until a final lump sum payment of the full principal. They’re an ideal financing model for improving and refinancing into a long-term loan or for returning rehabilitated properties to the market.
Loans for Income Properties
Some properties you leasing for income can be financed under the traditional commercial lending program that many medium-sized and larger businesses rely on when establishing new facilities, but there are also specialized loans for investors. Stated income loans, for example, allow a cash-out refinancing option so you can use the equity in a stabilized investment property to finance renovations or even the purchase of new buildings. Income loans are often preferable for this type of investment because they reflect the capabilities of your cash flow more accurately than a traditional loan would while also allow you the freedom to choose which of your properties will carry the debt for the new investment.