So, you’re curious about building long-term wealth? Commercial property is a great and viable way to do so. Although, many people face challenges when it comes to financing their property. So many different ways, which ones are better? Which ones are cheaper? We will discuss three different finance options in this article for you today.
Commercial Mortgage Loans
These loans are most definitely the most common way to finance a commercial property investment. Commercial mortgage loans are provided by banks and lending institutions and will either have fixed or variable interest rates. The overall loan amount and interest rates are mainly based on the property’s value but also consider the borrower’s credit and ability to repay back the loan. Commercial mortgage loans will usually range from 10 to 30 years and will typically require a deposit of 30-40%.
Private equity investors provide capital in exchange for part ownership, full ownership or a share of the profits. Private equity investors won’t always be individuals, institutions often seek to invest in commercial properties. Private equity as an option is often more flexible compared to traditional financing and is an avenue for those who may not have access to traditional financing sources.
A bridge or bridging loan is a short-term loan, usually taken out for a short period that could be from 2 weeks to 3 years. These loans are used to bridge the gap between the time when the property is purchased and when permanent financing is obtained. Bridge loans will often have higher interest rates and much shorter terms than traditional loans such as commercial mortgage loans. Bridge loans are great for investors who look to acquire a commercial property quickly.
These are the most common but by no means the definitive list of loans. It’s best to seek advice about the type of financing that best suits your commercial property needs now and in the future.