Need Financing? Consider CMBS Loans for CRE Acquisitions
If you are planning to make commercial real estate acquisitions, you may be weighing the potential benefits and drawbacks of available loan types. In general, CMBS loans carry certain advantages for many CRE owners and investors. Before deciding whether one of these loans is right for you, try to think through the following important details, including rates, potential prepayment strategies and penalties, and more.
Permanence
The first thing you may need to know about a CMBS loan is that it is generally considered a permanent form of financing. In addition to the stability of having permanent financing in place, another benefit of choosing this financing strategy is that you can likely get a fixed rate on your loan. In some cases, CRE owners or investors may use permanent financing options such as CMBS loans to replace shorter-term financing that was initially used for commercial acquisitions.
Rates
Before you apply for a CMBS loan, you will likely want to research available rates. These loans generally offer attractive rates, but your exact rate may vary depending on several factors. Before deciding on the precise terms of your loan contract, a prospective lender will probably need to thoroughly research your situation and property. You may need to supply information regarding the quality and condition of the property, its intended use, its likely future cash flow and more. Consider contacting a lender directly to learn what documents and files you will need to provide to help determine the rate you will be offered.
Eligibility
CMBS loans are generally used for a multitude of commercial property types. If you are thinking about acquiring an apartment building, self storage facility, office or industrial building, hotel, warehouse or other similar property, one of these loans may be perfect for your needs. Exact eligibility requirements might vary depending on the lender you have chosen. Do not be afraid to look around until you feel confident you have found the right lender for your unique situation.
Prepayment
Prepayment is another potentially important factor you will probably need to consider. As with most types of permanent financing, there may be penalties associated with early prepayment of your CMBS loan. If you truly need to pay off your loan early, however, there may be options available. The process of defeasance may offer you a path toward prepayment.
When you think about making a commercial real estate acquisition, you will likely need to consider the best type of financing for your needs. CMBS loans offer permanent financing with generally attractive rates. Before applying, consider details such as eligibility, prepayment and more.
