Financing for commercial real estate is a completely different game when compared to residential mortgage loans. It is a much more flexible and much more mobile form of financing.
Commercial Real Estate Tips ? What Are Hard Money Loans?
There is one thing you should always prioritize before anything else when considering whether to pursue commercial real estate, and that would be financing. Without further ado, we shall be educating you on hard money loans, which is just one of the many commercial real estate loan options you would be having at your disposal.
Basically, hard money loans for commercial real estate are in the court of last resort?s domain. Face it, these are far from attractive deals, but if it?s situation critical in terms of finances, you don?t have much of a choice. Normally, these loans will saddle you down with ridiculously high interest rates AND upfront costs. When you are facing the prospect of losing a commercial property, however, they can be a godsend because they also are granted very quickly.
These type of loans are considered very risky and are issued by private financing groups, not banks or lenders. The loans tend to be only available as the primary loan on the property, which isn?t that rare a situation in commercial property.
Unlike home loans, hard money loans are all about the potential sales price of a piece of commercial real estate. The appraised value of the property will not, in any case, be considered by the other party mulling over your loan request. They are going to look at the probably sales price if the commercial real estate has to be sold a few months after making the loan. The condition of the piece of real estate may vary on a case to case basis, but usually this would be about 50 to 75 percent of the property?s appraised value thereof.
To summarize, a hard money loan serves its purpose by helping you get past those unexpected and urgent surprises. It is undeniably a loan of last resort and is not an ultimate solution to a financing problem with a commercial property. If it?s any consolation, this buys you time, but this is time that could cost a fortune. But it could be all worth it if those few extra months worth of time bought with the hard money loan could help you work around the financial issue you have.
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