Creative Financing For Commercial Real Estate Investors

Creative Financing For Commercial Real Estate Investors

Commercial Real Estate Investing

There are many income producing commercial real estate similarities that are being offered below market that are great investment opportunities. The problem or obstacle for most real estate investors buying these similarities is the down payment required to acquire them. As a rule general rule to buy income generating apartment buildings and mixed use multifamily similarities one should be prepared to use 25% to 35% of the buy price for the down payment. Plus the investor must have closing costs and reserves of 6 months or more. This is a substantial investment that eliminates many possible buyers. This can often be conquer by these creative financing strategies for commercial real estate investors.

Creative Financing

This is a highly misunderstood concept in real estate. My simple definition has two parts. Creative Financing requires a character with substantial equity and a willing and motivated seller. If the seller is motivated however there is no equity there is no opportunity to utilize creative strategies to acquire the similarities. By the same token if the character has enough equity and the seller is neither willing nor motivated no strategy will work.

3 Creative Strategies to buy Commercial Real Estate

  1. Seller Financing and / or Carry Back: There are many ways to structure a deal  where the seller can finance the character or keep up a second mortgage for a short time and then the buyer can refinance the loan. Many lenders requires the loan to be seasoned one or two years. however there are lenders that we work with that will refinance closest requiring no seasoning. These deals close within 3 to 6 months from the initial seller financing contract.
  2. Transaction Funding Programs: These are programs where a private lender will finance the loan from One to forty – five days. The meaningful is to have a buyer ready to close closest or to be able to refinance at once. This only works when the end lender is aware of the transactional financing and they require no seasoning. As in point #1 above most lenders require one to two years of ownership seasoning so having the proper end lender is important.
  3. Down Payment Assistance Program: If the character has equity and the seller is willing to use it to help the buyer acquire the home, then a down payment assistance program similar to Ameri-Dream or Nehemiah (programs used to buy residential similarities financed by FHA loans) may be a great option for you. Ultimately the Down Payment Assistance Company (DPA) gives the down payment and the seller reimburses the company at closing. This can only happen if there is substantial equity in the building.

As before stated creative financing requires substantial equity in the commercial income producing character that the seller is willing and motivated to use to strategically sell there character as soon as possible. Lower the price simply is not the answer because the main problem nevertheless exist. Commercial Real Estate Investors do not have 25% to 35% for down payment plus closing costs and reserves. Let a specialized help you structure your deals to make them close.

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