Constructing real estate properties is a capital intensive process. Building a real estate property requires an input of a lot of money without which the whole business cannot succeed. This is why many people involved in this business often seek financial help to enable them to execute their commercial real estate development plans. Some of them turn to lenders for assistance while others seek other financing options. Even with these options available securing real estate financing is still not an easy thing and here is why.
Real estate is very complex and securing financing for it is equally complex. Successfully securing financing for real estate calls for the best proper planning and deep considerations of all the important factors which come in between. Unlike the normal mortgages given to the average people commercial real estate loans come with some requirements which are somehow difficult to meet.
Some of these requirements are large down payments, high and spotless credit scores with a well detailed business plan showing where profits are going to come from. Here are some further details on some common commercial real estate financing options you might want to consider on commercial real estate financing:
Traditional Commercial Mortgages
This is one of the best financing options for commercial real estate available in the market. This financing is only offered by banks and other financial institutions in business. Traditional commercial mortgages are an ideal source of capital for real estate business. However, the problem with this option is that it requires a significant down payment which can sometimes rise to 30% making the option less viable to people who do not have the necessary financial muscles.
The good thing with traditional commercial mortgages is that they come with a much longer repayment period. The repayment period for the traditional mortgage options start from five years all the way to twenty five years. This period is enough to businesses especially start-up businesses which might require some time in business to find their footing.
Institutional Financing
Institutional financing is another reliable way of securing financing for commercial real estate. However, this option only favours larger projects or properties like shopping centres, office buildings, industrials facilities and shopping centres. The financing is majorly provided by life insurance funds and other institutional lenders with interest in real estate. The problem with this kind of real estate financing is that it requires higher loan amounts and longer repayment terms.
Private Money Loans
Private money loans are another reliable way of securing financing for real estate. Even though the financing option is only viable for a set of businesses, it is still a good option for real estate investors looking for financing.  The source of money from private money loans is private investors and leading companies. These loans are known for their features like high interest rates and shorter terms especially when compared to traditional mortgages. The only advantage with private money loans is that they do not strictly consider the borrower’s credit history like it is the case with mortgage.
Conclusion
Commercial real estate financing is not easy especially when you factor in all the complexities that come with this process. Â Only select organizations are willing to commit money towards financing this business with some stringent measures. As an investor, you need to sieve through all the real estate financing options and pick one which favours you the most.
