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Financing Commercial Real Estate

Posted by Chris Peterson | May 28, 2015 | 0 Comments

Financing Commercial Real Estate

Financing Commercial Real EstateWhen you decide to purchase real property for your business, it is important to have a clear understanding of what is necessary before you proceed. Preparedness is the key to a successful real estate purchase. Because the purchase of commercial property can be a complex matter, you should strongly consider hiring a Bryan real estate lawyer to assist.

Factors Lenders Consider

Your first order of business is to find a commercial lender. If you don't already have an established relationship with a lending institution, you will need to do some research. Banks, savings and loans, insurance companies and private investors all offer commercial financing. Your ability to borrow and pay back the loan will largely dictate how good a loan you can obtain and where you can get it.

Regardless of the lender, the following are factors that will be taken into account prior to offering you a commercial loan:

• The type and size of the property in question • The intended use of the property, i.e. a warehouse, office complex, etc. • Any risks the lender will take on by making the loan • Rental income. You might, for instance, purchase an office complex and use only a limited amount of the space, and rent out the other offices. • Real estate market conditions • Any environmental matters associated with the property in question

Preparing for the Purchase

It is important that you acquire financing before you decide on a particular property. It takes lenders an average of 45-60 days to process your loan. If you find a property and then seek financing, you risk losing the opportunity to another purchaser who has ready cash or a pre-approved loan.

You will need to gather all of the following documentation for your loan application:

• Income/expense statements • Financial statements of business owners • Corporate financial statements • Copies of any existing leases • Your business plan, including how you plan to develop/expand the enterprise

It is a good idea to have a backup if the first lender falls through.

Matters Related to the Loan

Once you are approved for the loan, the lender will issue you a commitment letter. This indicates such vital information as the loan term, interest rate, purpose for the loan, and closing requirements. You will need to pay one or two percentage points of the loan as standby points. These show that you are serious about the transaction. When you find a property for purchase, you can then perform the necessary inspections and due diligence. You should also make sure that the title is free and clear of encumbrances. Expect to purchase title insurance.

Make Sure to Work with an Attorney

Because the purchase of commercial property is often complicated, it is in your best interests to hire a Bryan real estate attorney who will review all documents pertaining to the loan and help with any matters that arise. Call Peterson Law Group today at 979-703-7014 .

About the Author

Chris Peterson

Chris Peterson is the owner of Peterson Law Group. He practices primarily in the areas of wills, trusts and estate planning; probate and trust administration; elder law; and business law. Chris is also the owner of Brazos 1031 Exchange Company.

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