3 Challenges You Can Expect to Run into when buying Commercial Real Estate
There are a few challenges that you may encounter when looking for commercial real estate such as qualifications for a loan, financing issues like amortizations, down payments, and interest rates. Payas CRE has put together a list of challenges you can expect to run into when buying or leasing commercial real estate in Florida.
Loan Qualifications
First it is important to make sure you have a decent credit score before starting any business. Even if many people prefer not to borrow from a bank, you may still need bank assistance if the property owner insists that the payment be made through bank financing. It’s also a good idea to be prepared in case you need a loan later on.
If you decide to take out a loan, make sure you know what it’s for and how you’ll spend it — the bank will ask you these questions. It’s also a good idea to do as much research and due diligence as possible on the area where the property is located. You must also prove to the lender that you will repay the CRE loan, in addition to having a solid credit score.
You will need to meet the criteria for a commercial real estate loan. You will have to provide various applications and supporting documentation to the lender such as a company plan, personal tax records, and other legal documents. They may seek to view your business balance sheets and tax filings to ensure that you have other ways to pay back the loan.
Financing
After you’ve been approved for a commercial real estate loan, the following step is to figure out how you’ll pay for the amortizations, down payments, and interest rates. Some are fully funded by current firms, while others will rely on the loan until the company begins to generate revenue. In any situation, extensive research is required to ensure that the CRE investment has the ability to repay the loan. It may appear difficult, but it may be made less stressful if you know what to expect at each step to avoid sinking even before you begin.
Acquisition Costs
There will be additional fees associated with your CRE loan, which may vary depending on the type of loan you have. Keep in mind that the acquisition and maintenance of the commercial real estate investment will incur additional costs. Appraisal fees, survey fees, application fees, origination fees, and legal fees are the most prevalent. While most CRE loans have a variable or fixed rate, the loan will include interest, and the terms must be documented to avoid misunderstandings or legal issues, as well as the loan’s lifetime. If the loan needs to be refinanced in the future, there may be additional costs.
It may seem like an overwhelming process but if you have the right team, they can guide you every step of the way. Contact Payas CRE today for all your commercial real estate needs in Florida.
