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Different Types of Commercial Real Estate Loans You Can Apply For

But first things first…

What are Commercial Real Estate Loans?

A commercial real estate loan is a type of loan that you can acquire for the purpose of purchasing, renovating or refinancing a commercial real estate.

What constitutes as a commercial real estate?

This is where many people tend to get confused. The term commercial real estate has different meanings in different contexts.

  • From an investment point of view, any property that has the potential to generate income is classified as commercial real estate. This may include offices, retail shops, industrial properties and residential properties.
  • If you talk about commercial real estate in a business context, any property that is to be used for business purpose is labelled as a commercial real estate. This encompasses shops, offices, restaurants, hospitality sites and other commercial spaces.

Our focus would be on the former.

Types of Commercial Real Estate Loans Property Investors Can Apply For

So, what are the different loan options available at your disposal as a real estate property investor?

Below is a complete list:

1)     Permanent Commercial Loans

Permanent commercial loan is a first mortgage on a commercial real estate, having amortization and repayment terms of at least five years. These loans are usually made by either conduit, life insurance companies, credit unions or banks.

2)     Bridge Loans

A bridge loan is a short-term loan, acquired with the purpose of bridging the gap between immediate capital requirements and the period until long term financing is made available. These loans carry high interest rates and are offered by private lenders.

3)     Commercial Construction Loans

It is a type of commercial loan exclusively allotted for construction projects. The loan terms usually vary between one to two years.

4)     Structured Joint Venture Loans

A structured joint venture loan is a type of loan where two or more accomplices apply for financing in a group, with each party willing to share profits and losses equally. Venture firms and private speculators offer structured joint venture loans.

5)     Real Estate Purchase Loans

They are similar to adjustable-rate and fixed-rate mortgages. For an investor to qualify for a real estate purchase loan, they must have high credit score and significant savings. The loan is normally secured against the commercial property itself.

6)     Hard Money Loans

Hard money loans are a great alternative to traditional loans, offered by private money lenders. These loans carry significantly high interest rate, but provide flexibility both in terms of eligibility criteria as well as repayment terms.

Do you have any other questions about real estate financing options? Feel free to reach out. I am Gregg Marcus, and I’d be happy to help you out.

And while we are at the subject of real estate investment, check out this informational post to learn about the different factors that drive the real estate market.