A Client-Focused Approach to Business and Real Estate Law

What to consider before using a real estate loan

Individuals who are looking to invest in commercial real estate may be able to finance those investments in a variety of ways. For instance, it may be possible to use hard money or bridge loans. These are popular because they can close in a relatively short period of time. They are also popular because borrowers can obtain financing based on their rental income or history of generating income from real estate.

Generally speaking, hard money loans are made by private investors, which means that there may be some flexibility as it relates to the loan’s terms. However, one downside to a hard money loan is that it will likely come with a higher interest rate. Borrowers may also need to make a larger down payment and deal with expensive closing costs. It is important to note that hard money and similar loans are generally not available to those who lack experience as a real estate investor.

Borrowers should know that hard money, bridge and other private commercial real estate loans come with shorter terms. In some cases, the loans need to be paid back within a matter of months. For those who are looking to flip a home for a quick profit, it may be better to obtain a private loan as opposed to getting a mortgage that could take many years or decades to pay off.

Those who are interested in purchasing commercial real estate may want to have an attorney evaluate a deal before it becomes official. An attorney may be able to confirm that the seller owns the property and has the right to transfer it to another party. An attorney may also attempt to determine if the property has been properly represented to a buyer by the seller before the sale closes.