After I entered the job force at 18, I had money problems for quite a number of years. I earned a decent income, but I lived paycheck to paycheck and just felt like I would never get ahead financially. One day, determined to get ahead, I decided to record every purchase I made for a month to find out just where my money was going. I learned a hard lesson that day that small purchases here and there throughout the month really add up. I committed to a much smaller budget and began stashing savings away. Then, I researched the world of investing and made a few strategic ones with some of my savings. I am now doing much better financially, and I want to help others who need it, so I am starting a blog. Come back often for money management tips and tricks explained simply!
The market is currently saturated with unsold buildings, so if you are interested in simply purchasing a commercial property, you will not have a difficult time finding one. However, you may find that none of the commercial buildings available fit your needs and you may need a commercial construction loan. There are several options to choose from.
Types of Loans
When you will be purchasing a commercial property, you will typically need to take out a single loan for that property. However, when you will be constructing your own property, you will need to take out two loans. The construction process is very complicated and typically involves several parties, so the lending process is also very complicated.
First, you will need short-term financing. This type of financing is needed for the lease-up portion of your financing. Next, you will need long-term financing. This type of financing is necessary when you reach the stabilization portion of your construction project.
In some cases, the bank combines the short-term and long-term loans into one loan known as a construction or mini-perm loan. A mini-perm is a construction loan that has a shorter duration than a standard construction loan.
Short-Term and Long-Term Loans
When considering your lending options, you will need to choose between short-term and long-term loans. With short-term loans, you are expected to pay off the loan at the end of the year. This might be impractical if you do not have the funds to do this. With a long-term, permanent loan, after your home has been completed, you will transition to a permanent loan.
With a long-term loan where everything is all-in-one, the application process is much easier. You will only have to apply once. With other types of loans, you must fill out two applications. There is a risk that the second application might not be approved.
A single-permanent loan will typically have higher interest rates. Therefore, you may end up paying more money for the convenience, especially if you take a long time to pay the loan off. The all-in-one loan will provide you with fewer options than short-term loans.
Finding the Right Lender
Unlike with other types of loans, lenders sometimes do not understand construction loans, and there might be a breakdown in communication, which could lead to your project being stalled. For this reason, you will want to work with a lender who has experience with commercial construction loans.
Share30 April 2018
