After years of investing in single and multi-family homes, you’re finally ready to move up to commercial income properties.
Or, maybe you’ve heard about commercial real estate, and decided you like the idea of diversifying your investment portfolio with a triple net lease property or two.
Either way, you roll up your sleeves to get started, only to be turned away by your bank, who tells you they can’t give you a loan on a property that’s outside of their lending parameters.
Take heart. Although it may seem as though you’ll never get there, there are ways even a newbie investor can get financing for commercial income properties.
SELLER FINANCING
It’s not uncommon to find commercial investment property owners anxious to get a property off of their hands. While sometimes it’s due to that property not performing well, other times owners sell to cover another failing investment property.
Many of these commercial income property owners are open to seller financing, especially if they can use your down payment to help them refinance at a more affordable rate. They obtain financing, you retain the property deed, and both sides end up satisfied.
IRA AND RETIREMENT ACCOUNTS
Several services now make it easy to dip into your IRA or retirement account. They work by allowing you to transfer money from your 401(k) and IRA to a C corporation. The funds can now be used to buy a commercial income property – tax and penalty-free.
U.S. SMALL BUSINESS ADMINISTRATION (SBA)
Despite the economy, there is actually an increase in the availability of loans from the SBA. Due to the recovery act, government guarantees have gone up to almost 90%, meaning you might be able to put down as little as 10% on a prospective commercial property.
The SBA’s 504 program, which is meant to boost local economy or to boost the business of certain groups (women, veterans, and rural businesses are some examples), generally provides long-term fixed rate loans to fixed assets such as land and buildings to owner occupied businesses. If you fall into one of the eligible categories, and plan to maintain a business office in the building, you might be able to qualify for the 504.
STIMULUS MONEY
Stimulus money comes from stimulus programs, which boost the economy through various projects and regulations. While there are several ways to find out about stimulus programs specifically aimed at the commercial real estate investor are offered by local, state, and federal governments, one of the best ways is through Onvia, a bid tracking service. Onvia notifies you of emerging funding opportunities for your business through email alerts.
Getting your foot in the door of commercial income properties may seem like a daunting task. However, investors who not only persist, but take the time to educate themselves on the ins and outs, and connect with more experienced investors, will eventually succeed.
