Taking the initiative to invest in commercial real estate is a smart, if not bold step, towards increasing your investment portfolio. Having a hot, lucrative commercial property that earns significant returns as well as increases in value is a fantastic strategy for financial success. Making the move to purchase commercial real estate can become your ticket to bigger financial gains, especially in a market such as Denver, where a popular neighborhood can turn a commercial real estate purchase into the best financial decision you’ve ever made. But before you secure your commercial real estate property, you’ll likely require a loan to make the transaction a reality.
Secure a Downpayment
Purchasing commercial real estate differs from residential properties, in that you’ll likely need to have 20-30% of the purchase price up front in the form of a down payment. Securing a commercial loan, which will typically be a larger amount than a traditional mortgage, will be much more accessible to you if you are able to put up a larger amount of the total cost of the property
. Your loan will be seen as a lower liability if you are able to put up more capital upfront.
Prepare Your Financial Documents
Typically, a bank or financial institution will want to learn as much as they can about the lender prior to making a decision to provide a loan. You will likely need to provide things such as five years of tax returns, financial records and reports of your business for the last five years of since its inception if it is less than five years old, and projected cash flow for your business during the life of the loan. Banks will like to see that your business will be able to produce a net operating income of a ratio at least 1.25 the yearly cost of the loan. If you loan is $100,000 per year, you will want to earn at least $125,000 in income during that same time period.
Consider Potential Lenders
For commercial loans, you will have options in terms of which lender you decide to work with. You can secure a loan with a bank, which will provide the possibility of good rates but also require the most documentation. You may also choose to work with a commercial lender, who will have less underwriting standards but will likely have higher interest rates. You can also seek out an SBA 504 loan, which will offer below-market interest rates but will be limited to qualified businesses only.
If you’re seeking a qualified and knowledgeable real estate firm in the Denver area to assist you through the property investment and development process, Elevation Group is your preferred choice in the mile high city. We offer expert advice and help from start to finish in order to ensure your commercial or residential project is a smooth success, providing you with the needed peace of mind to make your dreams a reality. Contact us today
to begin the process of building your dream property development.