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Using Private Money to Purchase Commercial Property

06-30-2021

Commercial Property Investments usually provide a wide array of advantages for investors. They may often come at a higher price than residential properties but it's a good way to diversify your real estate investment portfolio.

Advantages of Commercial Property Investments

First, these investments present better revenues than residential property investments. Tenant relationships also skew more on the professional rather than personal since the owner deals with business owners. Finally, tenants would also be bound to religiously maintain their shops or offices to attract customers or clients which means relatively lesser property management issues down the road.

Commercial properties are usually bigger both in size and cost. So even experienced investors may find it difficult to have enough cash to purchase a commercial property. Hard money lenders who can finance commercial investments can help in these situations.

Traditional Loans

Financing of investments in most banks almost always leans towards a strict methodological process. If you want to jump into acquiring a commercial property quickly, it’s not an ideal solution.

Traditional lenders evaluate various factors before coming up with a decision, and it will most likely lean your capacity to pay. It could be worth a try if you have more time, but most borrowers go through this process and come home with disappointment.

Creative Financing for Commercial Investments

Not having enough funds shouldn't hold you back from expanding your real estate portfolio. There are unconventional but safe alternatives to financing a commercial property that you can use in situations like these.

One type of financing that you can rely on is hard money lending through commercial private mortgage lenders. This type of loan typically deviates from the traditionally strict banking process. Hard money lending companies put more leverage on your collateral’s valuation more than other factors used in evaluating your capacity as an investor.

A commercial private lender’s approach to lending emphasizes the value of your investment property. That value is where the loan amount is based. It is somewhat riskier for the lender as it mostly forgoes traditional lending and leans towards the processing of no credit check commercial real estate loans. A hard money lender can also be called a commercial private lender or a private money lender. There are several commercial hard money lenders nationwide and in your area.

Features of Commercial Private Lenders

Traditional loan channels such as banks usually burden the borrower with various requirements and qualifications over a tedious process. But commercial private mortgage lenders, the process takes only a week or two, and the application is much simpler. Hard Money Lending typically has the following features:

  1. Lower LTV Ratios

    LTV or Loan to Value Ratio is the maximum loanable amount for a collateral property based on its approved appraised value. Usually, financing or lending companies such as banks have a high LTV ratio of 85% of the property’s appraised value. Hard Money Lenders, however, since they are in collateral lending, peg the loan value between 50% and 70% of the After-Repaired Value.

  2. Collateral-Based Lending

    Hard Money or a Commercial Private Lender structure the loans they disburse on the offered collateral. They will still give weight to your credit qualifications and requirements but on a scaled-down basis.

  3. Loan Term Flexibility

    Hard money loans have shorter terms which usually take between 6 months to 36 months. Their rates can also be negotiated based on your real estate investing experience, your credit scores, and the overall profitability of your deal. Some lenders would also help you minimize your closing costs and downpayments with a custom loan program.

  4. Speed of Approval

    With collateral-based lending, some hard money lenders may offer no credit check for commercial real estate loans. Most commercial lenders will also have in-house evaluation (a.k.a. underwriting) which speeds up the process of loan approval and release.

  5. Business Relationship building Most private lenders for commercial property ventures operate locally. So if you can partner with a local lender, you’re likely to benefit from some preferential services and flexibility. Being loyal to your lender and establishing a good business relationship gives you an opportunity to enjoy faster transactions.
  6. Higher Interest Rates

    Private mortgage lenders for commercial property financing need to balance the risk they are taking with your loan costs. Hence, with a promised faster loan turn-around and favored collateral value against established credit norms, your interest rates will usually be pegged higher than what a commercial bank would offer. It is typical for local hard money lenders to give rates between 10.5% to 15%. But remember, hard money loans should be short-term. The idea is that if you have a concrete exit strategy on your investment, you should be making a profit above the interest rates you are paying.

Hard Money Loan: A Better Option

Private Mortgage Lenders for commercial property financing or lending offer fast turn-around times and easy fund disbursements. No extensive creditworthiness checking is involved in the process. But, how would you know if hard money loans are beneficial to your specific situation? Here are some of the reasons when hard money loans are a better option:

  1. If you engage in real estate fix-and-flip you need fast funds to finance their ventures. Usually, fix and flip investors can renovate and sell the property within a relatively short period of time, thus, you can move on to the next deal without the burden of extended mortgage payments.
  2. If you have a less-than-ideal credit history, a private mortgage lender might be a good option for you.
  3. If you would like to establish your credit history, but lack the proper income documentation needed to secure a conventional loan. An example is when you are self-employed or an ITIN investor who wants to purchase an investment property.

GL&L Holdings, the Commercial Private Lender for you

One of the well-established private mortgage lenders for commercial property in Houston is GL&L Holdings. We have been in business for more than a decade already and have helped clients realize their real estate dreams. At GL&L Holdings, we offer loans for commercial, SFR’s, Land, New Construction, and Rehab/Flips.

In securing a loan from us, it is best to come prepared to help you through the application process. Given this, we will need the following information for a smooth transaction.

  1. What would be the reason and the purpose of the loan?
  2. Where, what, and the condition of the property are you eyeing to purchase?
  3. How do you intend to repay the loan?
These are just three of the questions that need answering when you visit us for initial evaluation.

We would love to work with you and help you with your next investment loan. Let us build a lasting business relationship and allow us to help you realize your dreams.

Call us at 832-770-9415 and take the next step.

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