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What you need to know about Commerical Investing
Commercial financing refers to the purchase of commercially zoned properties that typically fit into one of the following Asset Classes:
Residential apartment buildings or complexes of more than 4 units
Small bay warehouses, big bay distribution, fabrication, showrooms etc.
Buildings that contain primarily offices such as medical buildings etc.
Store front, high street properties that can range from smaller strip malls to large community-oriented shopping centres, big-box developments and even regional malls
Almost all lenders, with the exception of private, joint venture or hard money lenders, review two key areas:
First, the Commercial Property
Does the property have positive cash flow? (Rental income less mortgage, taxes and expenses result in excess cash). Is the property marketable? The lenders are always thinking about what will happen when you default, and they are left holding and/or selling the property?
Most lenders do NOT want to own property… they are in the business of loaning money, not property acquisition or management. In commercial, the value of the property is determined by the cash flow, known as the Income Approach, so despite your purchase price, the lender may determine the value on which they will base their financing on which can sometimes be lower.
Second, you the borrower
Is there sufficient income to pay your own existing financial obligations, good credit, and income to qualify. Is it a corporation or personal?
Do you have sufficient liquid assets and a high net worth to carry this property if there are delinquent tenants or lengthy vacancies?
Do you have experience managing commercial properties and tenants?
Interested in commercial investment? The Windrose Group can help!
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