Using Rehab Loans for Commercial Properties

For real estate investors who specialize in commercial properties, at some point you may encounter a building that needs a complete renovation. You may have been attracted to the property’s low price and after investigating the possibilities, you realize that after a little fixing up, you could make a huge profit. In this situation, you have to think beyond your current financing methods and look into rehab loans. Most people are familiar with the idea of fixing up a damaged property, and then selling it for a large profit. In most scenarios this is done with residential real estate. There are also opportunities for flipping properties with commercial buildings. Real estate investors who take the time to learn this sector can make additional revenue beyond their current levels. For these prospects, it may be necessary to get either a bridge loan or a private loan.

Bridge Loans

Using bridge money for rehab loans is not something that is new to investors. The way a bridge loan works is that the money is used for short-term funding situations when there is a high probability of receiving a larger sum of money in the near future. With commercial rehab projects, this can be a great way to finance the initial cost of the property and all construction projects. Once everything has been fixed up, the property is placed on the market and sold. If a sale is quick, the bridge loan money can be easily paid back before its due date. Problems may arise, however, if your commercial property sits on the market without generating interest for a long time. You may also encounter difficulty if your rehab projects end up taking too much time and slow down the process.

Private Loans

Private lending is something that is common in all types of investing. Because of the unique challenges of commercial rehab projects, you may need to consider a private investor for rehab loans. In this situation, you must connect with individuals who lend out money for flipping properties. These people are usually silent investors who tend to have other careers that take up most of their time. They want to invest in house flipping projects, but they don’t want to be onsite. Once you connect with someone who can help fund your project, you usually have to start making decisions together. When your property is sold, you must split the profits with anyone who has put money into your project.

Taking out rehab loans for commercial properties is something that can help you reach higher revenues. Investigate your options in order to find the best funding method for your property’s needs.

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