Looking to finance your next commercial real estate purchase? If so, you might be on the lookout for a traditional bank loan. While this is often the most affordable and convenient option, sometimes it’s not the best fit for your specific needs. If you have issues with your credit, proof of income, or down payment, you might need to get a little creative with your commercial funding options. Here are some creative alternatives for financing commercial real estate so you can get the best deal for you.
Seller financing is exactly what it sounds like – the seller of the property finances a loan on your behalf. You pay him monthly payments like your lessees will pay you, and you still get to use the property like you want to. The major advantage to financing commercial property this way is the fact that you can usually get a lower interest rate or lower overall payoff with a seller instead of a bank. Plus, when the seller is the financer, he or she is going to ensure that the property is in a good state before you take over ownership. In other words, the seller will do whatever it takes to make sure the deal goes through successfully.
In a syndication, a group of real estate investors will fund loans in return for a percentage of the profit made on the property. This is often the case in a flipping setup, where the overall goal is to renovate the property and then resell it shortly after. You could choose to be one of the investors in a syndication, or you could choose to receive funding from a syndication. Either way, you will end up making money on a property.
Joint Venture Partnerships
If you have a wealthy friend or know of a good investor you want to work with, you can team up to pay for a piece of commercial real estate. You both put in the same amount of money or work, and then you split the profits accordingly. This works best when you know someone who has the same business goals as you so you end up looking for properties you both like. If you do not know anyone at this time who would like to enter a joint venture with you, there are forums, associations, and businesses that will work with you to find a partner you can trust.
Check out these alternative financing options the next time you go to buy commercial property.