How to Set Financing Goals for Real Estate Investments
If you’re looking to purchase investment property, it’s important to understand how commercial real estate differs from personal property purchases. It’s also important to understand the various real estate markets available to you and where each is at in its asset development cycle in your area. Markets for real estate differ substantially from city to city, so consider investing in different areas to find the best locations for the properties you are most interested in. From there, it’s easier to set clear goals for each new purchase.
Features and Purpose
After you have decided what kind of property you wish to invest in, you need to make a list of features you’ll be looking for. Include square footage and location characteristics, as well as purpose-specific features. If you’re looking at apartment buildings for your next commercial real estate purchase, set a goal for the minimum and maximum number of units you want to handle. If you’re looking at retail space, consider what you want for parking, number of storefronts on site, and so on.
Price Your Features in Your Top Markets
If you started by checking out where your best markets are at, you can go back there to see which locations with properties with the core features you need in your next investment. Even if the markets themselves are operating in the same value range, property turnover and the fast pace of the real estate market will make your best fit property’s location a little hard to predict. Casting a wide net helps ensure you get a great fit for your investment goals.
Understand Your Financing Costs
There are a lot of options for financing commercial real estate, and that’s a bit of a mixed blessing sometimes. Should you go with a traditional fixed-rate, amortizing product? How long should the loan be? Consider also what you can do with stated income loans, which are more like traditional business loans because they use your income from the property as the basis of the loan instead of its resale value. The loan type you choose will dictate your choices for repayment structures, so it’s important to understand which option gives you the best combination of access to equity and income.
Financing Your Purchase
Once you’ve found the property and decided on your best repayment structure and loan type, you need to find yourself a lender who can support those choices. That shouldn’t be too much trouble. Just remember, each lender has a specific focus for their own investment priorities, so if you don’t like one option, keep looking around for a more compatible choice.