Investing in commercial real estate, whether as an owner-occupied or investment property, can be a very lucrative opportunity. However, you will need to secure the right loan to make it happen. This can be easier said than done. Securing a commercial mortgage can be significantly more challenging than getting a residential one. The following tips will help you to improve your odds.
1) Check Your Score
You will need to have a reasonably strong credit score to be approved for a loan. Check your own credit report before you start searching for financing. You may find that there are some easily correctable issues. If you are applying for financing through a business, you may want to also check the credit of your business (assuming it has a history).
Of course, loans have different requirements depending on the type and lender. Hard money loans are much easier to qualify for than traditional commercial mortgages, for example.
2) Work on Your Finances
The commercial mortgage approval process is very focused on finances. You need to have sufficient income to justify the loan. Additionally, many lenders have guidelines on net worth and liquidity, especially for larger loans. With a residential mortgage, you can often exhaust your liquid cash on the down payment without issue. However, commercial lenders often want to see that you have some reserves.
3) Set Your Expectations Realistically
There is more to commercial lending than just running the numbers. You will also need to show that you have the ownership and management experience necessary to ensure that the investment is likely to work out, especially if you are buying an investment property. It may help to start small and build up to larger projects. Even if you have the money to make bigger investments, it is often a good idea to get some experience first.
4) Talk to Lenders
Lenders want to find clients just like you want to find a loan. They are often happy to discuss whether you are likely to be a successful applicant. Simply getting in touch with some potential lenders can lead to a lot of insight into what you need to do to make your project a success. Many offer pre-qualification processes that will also help you to make an informed decision.
Discover more about commercial real estate loans today. With the right loan and lender, you can ensure your real estate success.