Many times over the last 30 years I have been asked “Can I get a 30-year fixed rate loan for a commercial building like I can when I buy a house?” No, you can’t, and that is just the beginning of the differences when it comes to buying commercial real estate.
However, there are methods for financing commercial real estate. Banks are great sources for loans. Almost every bank loves owner-occupants of buildings. A much smaller percentage will look at financing investment properties. There is also SBA (Small Business Administration) financing for small business owners. In that case, you can put down as little as 5%. For conventional financing, you will most likely need at least 25% down.
You can typically float your interest rate or lock in a rate for 3 or 5 years, or sometimes up to 7 or 10. After that point, you have a balloon payment and then have to re-finance with the current bank or move the loan to a new bank.
When obtaining a bank loan, the bank will require you to get an appraisal of the property. They require this to make sure the valuation is unbiased. Hopefully the appraisal will come in above your contract price, but if not, be prepared to put more money down.
Other items to obtain prior to closing a commercial building are a title policy, a survey, and a Phase 1 Environmental Assessment. All of those items will protect you as a purchaser.
More items you’ll need checked out are the roof, the mechanical systems, the electrical system, and the zoning.
So why should you hire a broker to represent you? If the above reasons aren’t enough, you still have to find a property. That is the most difficult task. There is no single source of information available commercial properties. Reece Commercial has various methods available to help you find the right property!
Many business owners or investors have never bought a property before, so it is critical to have a knowledgeable team behind you. A commercial real estate broker can help guide you through the process and make sure that your buying decision is the right one!