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4 Simple Tests To Find Good Real Estate Investment Properties
You're driving along the road when you spot it. There in the middle of a shaggy lawn sits a disheveled property. It may need a good coat of paint, or a shutter straightened out, but it's easy to see that with a little work it could be a little gem...
Advantages Of A Furnished Apartment
The first issue for you to consider whenever you want to rent an apartment is whether you need it for a long period of time or a short one. This is very important because if you are intending to spend more years in an apartment you may consider to...
Home Improvements - Making Decisions
If you have a family, planning home improvements should be a
family matter. Still, you want to stick to ideas that work.
Ideas That Work
We've all seen families who get along well most of the time and
families who are constantly at odds...
How To Make $100,000 And How To Lose A $50,000 From The Same Property
At our new web site, www.GetPreconstructionDeals.com, I always get one specific question sent in after we announce a new preconstruction project: "So Chris, is this preconstruction project a good deal?" . The answer that is expected back by the...
Living In Las Vegas
Las Vegas is one of the sunniest cities in the United States -- with an average 320 days of sunshine per year and only 4.19 inches of rainfall. The winters in Las Vegas are like no other. Many of us do not pack away our shorts because we can wear...
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Commercial Income Property Financing: Part 1 Of 3
Welcome to this first portion of a three-part series about income property. In this first segment we will be discussing financing options for commercial income properties as well as the upside (and downside) of owning this type of property.
If you’re interested in getting into the income property business, chances are you’ll need financial assistance from your local bank or private lending institution. You’ll soon discover that making sense of the many different options available can be confusing if not down right frustrating. If you’re new to the income property market you may be unfamiliar with some of the terminology you’ll hear. The purpose of this article is to assist the novice in getting a good start in this potentially lucrative industry.
There are many different options available to you depending on the type of income property you’re interested in investing in. Most lenders will recognize three separate and distinct types of property, each with it’s own financing requirements. These properties include commercial, residential, and industrial income property.
Commercial Income Property
If you plan to invest in a commercial income property, you’re probably planning to rent the building to retail businesses for use as office or warehouse space. As a commercial income property owner you can benefit from a perk not usually available to residential or industrial income property owners; you have the option to charge a percentage of your tenants monthly income in addition to a set monthly rent.
This percentage is usually based on the gross monthly sales revenue of your tenant. For example, the rental contract may include a $5000 per month base rent amount plus 5% of the tenant’s gross sales for the month. If you’re tenant brought in $20,000 of revenue last month, you get an additional $1000 on top of the $5000 base. You may be unfamiliar with this type of arrangement, but it is actually quite common.
If you purchase retail income property with good location in a growing neighborhood, this can be a good way to capitalize on your tenant’s growing business without
raising rent. Most income property owners charge from 5% to 10% of their tenants’ gross monthly sales revenue.
When it comes time to finance the purchase of your commercial income property, a private lender can usually provide better options and interest rates than your bank or credit union. A private lender is in a position to provide the best option for two main reasons; 1) unlike your local bank, private lenders specialize in income properties (as opposed to home loans), and 2) private lenders are more selective in their loan requirements allowing them to provide better terms for those borrowers they accept.
Loan terms (the time the lender gives you fully repay the loan) for commercial income property typically ranges from five to twenty years. Many private lenders will also have a minimum and maximum loan amount which usually goes from $500,000 to $2 million.
Interest rates can run from 5.60% to 7.20%; substantially lower than the most competitive bank. It’s also important to know your lender’s LTV (loan-to-value) ratio. The LTV is simply the ratio of money borrowed on a property to the property’s market value. In other words, you will have to come up with a certain amount money yourself before you will be considered for a loan. Currently, most private lenders offer LTV’s of 70% to 75%. If you plan on financing the purchase a $1.5 million office building with a lender offering a 75% LTV, you will need to come up with at least $375,000.
In the next segment, Residential Income Property Financing: Part 2 of 3, we will be discussing how to finance and effectively manage an apartment complex.
About the Author: Cameron Brown is an internet marketer specializing in investment property. For more information on income property, please visit http://www.sncloans.com/income-property.html
Source: www.isnare.com
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