🪙Overview and Comparison Commercial Loans

[Jorge Abreu]

Here is a brief look at what is on offer out there:

➡️ Agency loans as mentioned, such as by Freddie Mac and Fannie Mae. They usually last for 5 to 10 years and allow you to borrow up to 65% of the property's value. These loans often have interest-only payment options, meaning you only pay the interest for the duration of the loan or a shorter period based on the market conditions. These loans are amortized over 30 to 35 years, and it is advisable to approach DUS lenders directly to avoid additional broker fees.

➡️ HUD loans have slightly better terms than agency loans but require a longer approval process of around 6 months. They are suitable for long-term holdings of at least 8 years and can also be used for new development projects.

➡️ Bridge loans serve as a temporary financing option to bridge the gap between agency or HUD loans. They are ideal when a property requires significant value-add improvements and substantial capital expenditure.

➡️ CMBS loans are securities backed by a bundle of commercial real estate loans. Investors receive repayments as borrowers make payments on these loans.

➡️ Banks offer commercial loans with terms that may not be as favorable as agency loans. However, they can serve as a good alternative to bridge loans or construction loans. While the leverage may be lower, banks typically offer fixed-rate options instead of adjustable rates.

Remember, each property tour is an opportunity to gather valuable insights and make informed decisions. As I mentioned earlier, touring properties during both day and night is significant. Drive around the property and its surrounding area to get a comprehensive understanding of the location. Engage with local officers to gather insights about the neighborhood, and don't hesitate to ask them specific questions about the property.

When touring, pay attention to tonality, body language, and hidden cues from sellers. Document the tour with photos and videos for detailed analysis later. Utilize checklists and capex estimators to capture essential information and assess the property's condition accurately.

Take advantage of property tours to gather valuable insights and make informed decisions. Each tour is an opportunity to build rapport with sellers and brokers. Don't rush through the process; take the time to gather the information you need to make a successful investment.

In summary, exploring HUD loans can provide you with competitive rates and favorable terms for your real estate investments. However, keep in mind the longer processing time and the need for seller cooperation during the acquisition process.

✨In the words of one of my mentors, “The more questions you ask, the more information you gather that's not available through numbers alone. Be a detective during your property tours and make smarter decisions.”🙌