Commercial Real Estate

How To Get A Commercial Loan in 5 Steps

Many new commercial borrowers are familiar with the process for obtaining a home loan—you find a lender or loan officer, submit income and tax documentation, present property information, and after a bit of back and forth, hopefully obtain the loan approval. However, the commercial lending process is substantially different. If you require a commercial real estate loan it is important that you have an in-depth understanding of the process. In this guide, we will review the five steps you need to know in order to apply and get approved for a commercial real estate mortgage. Step 1: Identify a Property and Put it Under Contract. Your first task is to find the right property and to execute a ...

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How to Start Investing in Commercial Real Estate

There are many people from all walks of life that are commercial real estate investors—small business owners, corporate executives, professional service providers, entrepreneurs, and professional investors. With the right preparation and understanding, commercial real estate (CRE) is the perfect asset for an investor to earn passive income while owning an appreciating asset. However, commercial real estate is not without its risks, so it’s important that any potential investor understands what they’re getting themselves into. Here are 5 steps to follow in order to jump into the commercial real estate investment game safely:It’s important to set an affordable budget for the property (...

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5 Steps to Invest in an Opportunity Zone

In order to avoid paying Uncle Sam on the profit you made on that stock portfolio, property, or other investment that would have usually triggered the capital gains tax (currently up to 20%), you can re-invest that money into an investment property in a designated Opportunity Zone in order to defer, decrease, or even eliminate it (depending on how long you hold the property). Created by the Tax Cuts and Jobs Act in 2017 and officially designated in 2018, Opportunity Zones are areas that have been identified as “economically distressed” and in need fresh investment money in order to breathe new life into the community. They are designed to spur economic development by providing tax benefi...

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What is a Treasury Swap Rate?

The US Treasury Swaps work just like any other interest rate swap, but are pegged to the US Treasuries rather than another index (i. e. LIBOR). The Treasury contract would be an agreement between two separate parties to exchange one stream of payments (i. e. treasury bill) for another over a set period of time. The parties to a typical swap contract are 1) a business, financial institution or investor on one side and 2) an investment or commercial bank on the other side. Interest rate swaps, including treasury swaps, can be used for many disparate purposes. Businesses can convert their debt on floating interest rates to fixed interest rates or investors may speculate on the long-term interes...

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What is a Treasury Rate (Yield)?

The US Treasury Yield (also referred to as the Treasury Yield Curve Rates, Constant Maturity Treasury Rates, or CMTs) are calculated by the US Department of the Treasury from the daily yield curve. These  rates are essentially the return an investor would receive from the purchase of a US government debt obligation (i. e. a bill, note or bond); it is the interest rate that the government pays to the investors in order to borrow money for different lengths of time (i. e. 30 days, 60 days, 90 days, 6 months for short terms and 1, 2, 3, 5, 7, 10, 20, and 30 years for longer terms). [Insert Current Treasury Rates Here]The treasury rate curve is plotted on an x and y axis and shows several yield...

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Interest Rate Swaps & How to Use Them

A bank may suggest that a borrower use an interest rate swap (IRS) in conjunction with an adjustable-rate mortgage (ARM) instead of a traditional ARM or fixed-rate commercial real estate loan product when interest rates are low but expected to rise in the future. This hedges future interest rate risk and can have certain advantages over typical fixed rate mortgage products. Typically borrowers will choose a swap rather than a typical ARM or fixed rate portfolio loan for the following reasons:To get a lower all-in interest rate and paymentsTo protect against future interest rate increasesTo lessen or eliminate potential prepayment penalties A swap is a type of interest rate derivative (IRD) t...

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How Millennials Are Changing Commercial Real Estate: Office Vacancies (Pt. 2)

The millennial attitude toward work is very different than it was for Generation X or the Baby Boomers. While being extremely savvy with technology (we are the “Facebook” generation after all), millennials work to live, not live to work. Slaving away to prove our worth and escalate up the corporate ladder at a Fortune 500 company for 40-50 years until we finally retire is not the goal of our generation (no offense, parents and grandparents! ). Instead we are a generation of efficiency, technology, creativity, and experiences. While we understand the necessity of working to make money and provide a sense of accomplishment, we value our personal lives substantially more than the generati...

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How Millennials Are Changing Commercial Real Estate: Crowdfunding (Pt. 1)

Many members of the so-called “millennial” generation (1982-2004) entered into the job market during one of the most difficult times in US history—the Great Recession. Loaded with student debt, no savings, big dreams, and the skills learned during internships, we had to come out of school and try to make a living when most companies were not only not hiring, but letting go some of their most seasoned employees. This difficult economic environment paired with the technological savviness of our generation has combined to make a meaningful and unique contribution to the growth of commercial real estate, which has been long overdue. One of the most interesting ways this creativity has expr...

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5 Reasons Your Commercial Mortgage Rate Could Go Up Before Closing

For both new and experienced investors, the commercial loan diligence and closing process can be stressful, and the last thing any borrower wants to think about is their interest rate increasing between submitting their loan application and closing. However, there are several factors that can lead to an interest rate change before the loan closes, which can not only affect investor returns, but potentially down payments if the change is drastic enough. The 5 most common reasons an interest rate increase can happen are the following:One of the easiest ways to protect yourself from interest rate increases is to lock the interest rate before closing. Locks (if available) can freeze the rate for...

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5 Ways Commercial Real Estate is Different Than Residential

Commercial and residential real estate differ in many ways, which is why it can sometimes be difficult for a residential investor to transition into the commercial arena without professional assistance. These are just some of the ways residential and commercial properties differ:1.  Property Occupancy.  Residential real estate is a single-family home or building with 4 residential units or less (i. e. duplex, triplex, 4-plex) that has individual(s) or family(ies) as tenants. A commercial property is any property that has commercial businesses as tenants or a multifamily complex with 5 or more units. Both a residential and a commercial property will be zoned accordingly with the county it i...

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5 Mistakes First-Time Commercial Real Estate Investors Make

Commercial Real Estate is unlike any other investment because it is a real asset that can be affected by not only the real estate market, but also the greater financial markets, changes in consumer habits, employment, and other seemingly unrelated factors. That is why it is one of the most complex investments to make for those that are new or unfamiliar with the industry. Here are some of the most common CRE newbie pitfalls:There are many reasons a property might be the “wrong” property for a first-time investor. Some of the most common reasons (although non-exclusive) are the following:The wrong location. Maybe the property:is too far from the buyer’s primary residence for proper ov...

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