Even though Texas Commercial Mortgages are a great way to launch your real estate revenue stream, there are a number of drawbacks. None of these negatives are insurmountable, but it is better to know about them ahead of time.
In spite of all of the benefits of leveraging a loan to help you acquire commercial property that will generate revenue, there are some dangers to using a Texas Commercial Mortgage to begin building a real estate empire.
The first hurdle that you will discover upon making the decision to pursue a loan, is coming up with the down payment. While a typical loan covers the majority of the purchase of the property, lenders typically only cover roughly 80% of the total cost. This means that individuals or business owners must come up with the additional 20% as a down payment. Depending on your current revenue stream, this could be a difficult pill to swallow. If you are business owner, you must weigh the factors of whether or not this is a smart investment for a good deal of your cash flow. A borrower must also take into account the additional fees, assessments and charges that will come with securing a loan. These are also not covered by the bank and must be covered, out of pocket, by the borrower.
Another potential drawback to a Texas Commercial Mortgage is the interest rate. This is also an advantage, but it is important that a borrower understand what type of interest rate they are getting. With a fixed rate mortgage, the borrower is locked into a specific rate for the term of the loan, whether or not interest rates as a whole rise or fall. Paying attention to the market will help determine if it is a good time to lock in a rate. However, a variable rate mortgage can be very dangerous to a business owner. When a loan is as large as most are for commercial properties, a fluctuation of even one point could spell disaster. This is dangerous because the rates and market as a whole are completely outside of the control of a business owner.
The decline in property value is also another drawback that borrowers might face. Statistically, overall, the real estate market is on a steady increase. However, this is an average and does not necessarily apply to all properties. There is a chance that you could find yourself holding one of these properties that declines in value during your ownership. While this does have the possibility of affecting your future borrowing potential, it is nothing to panic over. There are a number of strategies to implement so that you do not lose your property by such a down turn.
What can I do to minimize the drawback of a Texas Commercial Mortgage?
The best way to minimize your risk as a borrower and maximize your potential is to stay informed, stay organized and stay focused. There are a number of factors in the success of your business that you can control, so do the best that you can to maximize those successes. If all is going well in the majority of your business, the ups and downs of the market will not have as great of an effect as you might fear. Texas Commercial Mortgages are not without risk, but if managed correctly, they can greatly enhance your revenue stream.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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