Commercial Real Estate Is Hot!
I’m sure you already know that the residential real estate market has all but dried up. Oh sure, there are residential investors out there waiting like vultures to profit off of some poor homeowner’s foreclosure misfortune but the one area of real estate investing that is hot right now is commercial real estate.
Everyday I am getting phone calls from people wanting to get a commercial mortgage and get into this hot new market. Investing in commercial real estate is quite a bit different from residential real estate investing. With commercial real estate lending the lenders are mainly interested in the property. It is less about the individual person or company that is buying or refinancing the commercial property and more about the income and condition of the commercial property.
First of all commercial mortgage lenders want to know how much the commercial property is receiving monthly for each unit that is rented. You fill this information out on a rent roll form. On the rent roll form you list the monthly rent received and if you currently have a lease on each unit and when that lease expires. If you have units that aren’t rented out at the time they will want to know how much you can rent each unit out for.
The borrowers credit score is also important in commercial mortgage lending but not as important as it is in residential real estate. In commercial real estate most of the mortgages are stated income/stated asset. If you are purchasing or refinancing commercial property with a stated income product your interest rate will of course be higher than if you can show your income. But most of the people that own commercial properties are self employed and they often do not show a lot of income on their tax returns because self employed people tend to write off as much income as they can. If you have a low credit score you may need credit repair before you are able to purchase a commercial property. A higher credit score means that a lender will go higher on the loan to value of a property.
Also when purchasing commercial property you must get approved for each individual property that you are looking at purchasing. It’s not like you can get a blanket preapproval which is good on any property like it is in residential real estate. You are approved by each properties income and condition.
The great news is that once you are approved you can close on your new commercial property quickly, usually within 30 days.
The first thing that you will want to do is to find a good commercial mortgage broker. A good commercial mortgage broker will have lenders with different types of programs. Let him know what you are type of property you are trying to purchase and what kind of cash and credit score you are working with. After you obtain a mortgage broker you can find a commercial real estate agent that can help you find a property or you may even try to find the commercial property yourself if you are looking for a bargain from a for sale by owner property although I would suggest that if this is your first commercial property purchase that you use a licensed real estate agent and of course a licensed real estate broker.
Sandra Sheely is President of First Financial Mortgage, Inc. in Sunrise, FL. She has been in the Real Estate Industry for 12 years with experience in the mortgage industry and title industry. She has a couple of Mortgage websites. www.ffinancialmortgage.com and www.lowestraterefi.com
She writes a mortgage blog on both of her mortgage websites. She has a credit repair website at firstfinancial.fixcreditbiz.com/
