Tips for Building Financing
You’ve decided to buy a new building, and unless you have hundreds of thousands of dollars sitting in a bank account or mutual fund somewhere, you’re going to need to pursue financing from a lending institution, family, or perhaps a guy named Vinnie. Just kidding; don’t call Vinnie.
Regardless of where you get the cash, you’re going to have to shop around. Lenders will offer different rates and packages, and then there are government programs designed to help you buy a new building and spur economic development. There are some key considerations you’ll need to take into account when looking into financing for a new building.
How much money are you going to need as a down payment?
Like a house, you’ll likely need substantial cash for a purchase. Some government programs, like the Small Business Administration’s 504 program, can get the down payment as low as 10%. Other conventional bank loans will be more in the neighborhood of 20%. This means if you’re buying a million-dollar building, you’ll need $200,000 in cash. Save your pennies!
Know your APR.
Keep track of what your APR is, or the annual percentage rate. You’ll be quoted a number around 5-5.5%, and this will be the rate for a specific period of time. This is only your rate for a specific period of time because your loan will adjust. Remember the adjustable rate mortgages that created the mortgage crisis in 2008? Virtually all commercial loans are adjustable. It’s just the way it is. You can refinance them in the future, but there will be some penalties, so be sure to read the fine print.
Pay off your loan as soon as possible.
Make time to run all the numbers many, many times. You don’t want any surprises when it comes time to sign on the dotted line.
Consider all your finance options carefully and seek an experienced REALTOR® or broker’s advice before making your final financing decision. Contact Chris today at email@example.com or 715-450-4990 if you’re looking to buy, lease, or sell!
Stokes Herzog Realty LLC is Eau Claire, Wisconsin’s commercial real estate brokerage firm. Our team of professionals represent tenants, landlords, buyers and sellers in every facet of commercial real estate. Throughout the State of Wisconsin, Stokes Herzog Realty LLC specializes in tenant representation, property acquisition, surplus disposition, leasing services and investment sales. We look forward to working with you!