Seven Steps to a Successful Commercial Real Estate Loan

Work with an experienced Commercial Real Estate mortgage professional

Commercial Real Estate financing is very different from financing your home.  An experienced Commercial Real Estate mortgage professional will underwrite your loan before applying in order to determine with which lenders you can qualify and the options available with those lenders.  This will save you a considerable amount of time and money.  If you don’t qualify the best professionals will work with you to create a plan so that you can qualify.  They will also have a team of experts that will help you locate a property, understand the long term financial impacts, and close the deal.

Have a plan

What are you trying to accomplish?  Are you looking for a building for your business?  Are you looking for a turnkey building that will pay for itself?  Are you looking for a building that requires improvements, but has a significant upside?  What are your return requirements?  These are just a few of the things that should be considered and discussed when you are creating your plan.  Don’t over analyze the situation, but have a goal and work with someone that understands your objectives and can give you credible advice on how to get there.

Know your credit situation

Your credit history plays a key role in obtaining financing.  Your credit score is not the final determining factor, but lenders consider it and look for patterns and trends.  The interest rate of the loan, the amount of the loan, and ultimately the approval of a loan will be influenced by your credit history.  Know your score, know how that score is determined, and, if necessary, know how it can be improved.

Have your documentation ready

The documentation can vary, but in general you will need both personal and business financial information, a resume, and financials on the property you are buying.  This is important information in determining your ability to get a loan, the amount of the loan, the rate of the loan, and the structure of the loan.

Have cash available for a down payment

You have to have a down payment to buy commercial real estate.  The amount you have to have depends on the property type, the anticipated use of the property, and the lenders underwriting parameters.

Understand your options

The key point here is that not all lenders are alike.  In fact, they can be very different.  Your plans for the property, your financial situation, the type of property you are buying, the use of the property, and even location of the property will be considered by lenders.  Lenders have preferred property types and businesses.  You need to know which lenders to approach so you don’t waste your time.

Understand Cash Flow, Debt Service Coverage, and Loan to Value

These three things are the ultimate determining factor in how much money a lender is willing to lend.  Lenders calculate these numbers differently depending on their credit guidelines.  Knowing these ratios will help you determine the availability of financing, where that financing can be obtained, and the return on your investment.

Call me:

Chris Cappeto

(707) 888-4402

e-Mail me:

chris@baltimore-financial.com