by dorraadmin | Apr 11, 2024 | Blog
If you looked at the portfolios of some of the wealthiest people in this country, you would likely find commercial property among their other investments. This is because these assets have lower risk and equal or higher returns than other investments, including the stock market. However, these are common mistakes you should avoid if you plan to invest in commercial real estate.
Not Planning for Your Taxes
Although real estate investors tend to pay little income tax due to depreciation and other deductions, they do have other tax responsibilities. The most important is property tax, which can cause you to lose your real estate holdings if they are not paid. In addition, these taxes increase each year. You will also encounter capital gains tax if you sell any of your properties for more than your purchase price.
Therefore, take the time to calculate your tax responsibilities before you purchase a property. Be sure you have the money set aside so that you can pay them, and plan for them to increase in the future.
Not Evaluating the Risks
Each type of commercial property (multifamily, retail, industrial, office, multi-use, raw land and special use properties) has different advantages and disadvantages. For example, multifamily units often have higher returns, but their management and turnover are greater. Office complexes may have longer leases and less management, but you may have difficulty filling them, especially in challenging economic times.
Therefore, learn about the advantages and disadvantages of each property type. Evaluate what you are willing and capable of doing, and choose the property that best fits your needs, risk tolerance and abilities.
Lack of Fiscal Responsibility
It can be tempting to purchase the best deal you can find, but if you become overextended, you can quickly get yourself into trouble. Set and stay within a budget. Consider the risks of the property and balance that with your finances so you have enough cash available for any unexpected expenses. Build a long-term strategy so you don’t assume too much debt upfront.
Not Calculating Expenses and Revenues Accurately
Many first-time investors overestimate revenues and underestimate expenses. This can cost you your property. Therefore, carefully analyze the seller’s expense and revenue reports. Consider the rental income and occupancy rates carefully. Have the building inspected to determine upcoming maintenance requirements. Review past expenses and consider increases, such as electricity price increases, in your analysis. Consider all renovation and repair needs. Also, determine whether you will use a property manager and account for these costs as well.
Don’t be afraid to dream big, but balance your dreams with your budget and risk tolerance. Choose commercial real estate that fits your needs and budget.
by dorraadmin | Mar 8, 2024 | Blog
If you are interested in real estate, you may have heard about fix and flip houses. It is where you take a home that needs renovations, fix it, and then sell it for a profit. It has the potential to be lucrative, which is why many people are interested in trying it out. However, buying a house outright is not always possible. It is why loans for fixing and flipping are popular. Here are some tips for using this type of loan to get the most out of it and your time.
Use It To Buy a House
A loan for fixing and flipping a house can help you buy the property you want. A home in a popular area can bring in a lot of money when it is time to sell. Also, a run-down house with potential is another pick for this type of loan.
Keep in mind that it is essential to have an inspector look at the home before you buy it. It can reduce problems later on if you know about them beforehand. Before getting a fix and flip loan, ensure it covers the cost of the home you want to purchase.
Use It To Buy Furniture and Appliances
When renovating a home, you need to buy new appliances. The latest models can help you charge a higher price and make people more willing to pay. A loan can cover the costs of things like refrigerators, dishwashers, and washing machines. If you want to stage the home, you will need furniture. Choose pieces that suit the house and make it stand out. It can make it more appealing to potential homebuyers.
Use It To Fix Up the Outside
The outside of the home should not get overlooked, especially since that is the first thing people see. Paint the house, fix any damaged or old areas, and check the roof. You can also use the loan to make the yard seem more appealing.
If you have a front yard, make it more inviting and make the backyard more relaxing and comfortable. If your budget allows, you may want to add features like a pool or a gazebo. Choose items that fit the feel of the home and make it more valuable.
Fixing up a home does not have to cost you a lot of money. Take time to research which type of funding is best for you. A loan can help cover your upfront costs and help your home sell faster.
by dorraadmin | Feb 8, 2024 | Blog
One key to running a successful commercial enterprise is balancing the books. Thus, checking on business financials remains a wise practice. First-time entrepreneurs might question whether this task is truly worth the effort. The fact remains that ignoring this suggestion puts businesspersons at risk.
Automation Breeds Mistakes
Computerization is a double-edged sword. On the plus side, it helps reduce the element of human error. The downside is it triggers the assumption that everything is being handled properly. This can then lead to damaging oversights that throw off one’s budget.
Take automatic payments as an example. Scheduled electronic deductions block the possibility of forgetting to pay a bill. At the same time, people assume that invoices are being accurately paid. This encourages tuning out. Terms could change without notice, possibly resulting in a forced overdraft. An errant charge might suddenly appear. Speaking with a customer service representative is necessary to reverse it.
Financial Reviews Deliver Insights
Examining records may raise questions that are worthy of investigation. When the dollar figures that leaders expect do not appear, they don their sleuthing hats. A stretch of in-house research could uncover cracks in their standard operating procedures. Sadly, even employee theft may be the cause. The sooner such issues surface, the faster they are handled.
Combing through business financials may also reveal delinquent customers. Enterprises without dedicated accounts receivables departments are likely to overlook this matter. These owners must make a concerted effort to identify unpaid invoices. Once they do, they’ll know which clients need a bit of reminding or pressure to spur them into paying.
Badly-Timed Loan Requests End in Rejections
Independent ventures sometimes need extra working capital to keep their doors open. An emergency could arise that drains corporate savings. Often, a loan is the best solution. That said, a lending institution might wind up denying an application. Many times, poor fiscal oversight is the cause.
One way of reducing the odds of this outcome is by applying at the right time. Seasonal operations often have specific calendar periods when profits are at their peak. Success is more likely when cash flow is at its highest. Even if approval would happen anyway, the rates and terms are bound to be better. Greater profits also mean taking out a loan will be less of a cause for worry.
Wise entrepreneurship involves reviewing business financials with regularity. Thankfully, it is an easy task that leads to more than a few desirable payoffs.
by dorraadmin | Jan 11, 2024 | Blog
Real estate value has risen for several years due to insufficient inventory. Everyone wanted to move, and businesses sometimes moved with their buyers and workers. While great for sellers, it proved harder for buyers, including investment properties.
An investor’s savings may be insufficient to get some properties they eyed during a seller’s market. If the company eyeing the parcel can’t get traditional financing, it may be necessary to get a loan to bridge the gap when purchasing a property. Bridge loans help any buyer to beat out the competition.
What Is It?
The bridge loan program helps borrowers with gaps in their funding for investment or commercial properties. Some lenders will refer to this loan as swing financing or gap financing. This loan type works best in the short term and comes with high-interest rates.
This finance product can help any borrower when they need extra funds to win a property or finish a construction project. A bridge loan may seem like any other loan, but it differs in how you use the financing itself.
How Do They Work?
These loans fund fast in comparison to other loan programs. So using bridge loans to support urgent gaps can help with a borrower’s critical real estate or different business needs. A lender will ask that you put the property as collateral in their loan terms.
Many different types of lenders offer this program, including banks and alternative lenders. Shop around to find the best terms and rates. Some loans will also provide prepayment incentives, which can help mitigate overall loan costs if the financing is paid early.
When To Get One?
Bridge loans are outstanding when you need fast financing for other things besides real estate. They can help with inventory needs or anywhere there is a funding gap. However, it is mainly used to help purchase or repair investment or commercial property.
Before trying to qualify, a business will want to look at its cash flow to confirm it can’t get a traditional loan. It needs to ensure it can pay off these loans on time. Not only is it high-interest debt, but it is secured on physical collateral.
This program may suit some situations, but the borrower will want to consider all options before taking a bridge loan. Many lenders can help with financing gaps and provide a bridge loan. Finding the right lender is crucial as these loans may become costly depending on the loan terms and rates.
by dorraadmin | Dec 8, 2023 | Blog
Buying an investment property with a bank is difficult for some business owners. A traditional lender will need specific conditions met before lending money to you. When you start your business, it may not even be possible to meet the many mandated requirements of a bank.
A hard money loan may be a good option if you don’t qualify for a traditional loan. There may be a lot of pros and cons for this loan type. But if you aren’t ready for a conventional investment property mortgage, you can use a hard money loan to get started.
Purpose
Hard money loans are a type of short-term bridge loan. A bank doesn’t work with this loan program. Individuals or companies will lend your company money using the property to secure the loan. If you default, the lender will collect the collateral.
Pros
Because this lending program is secured by real property, the lender will not look into your finances. The lending company for hard money loans will need to know how much the property is worth.
The process to qualify is nominal, shortening the time to obtain funds. Depending on the lender, you can expect to wait anywhere from a few days to a few weeks before you get your funds.
A hard money loan helps if you just started your business and can’t qualify for a traditional loan. You won’t need huge cash to purchase a property with this loan.
Cons
Your origination fees and interest rates are lower at a traditional bank than with hard money financing. Because this loan type is higher risk, a lender will want to protect themselves.
Short-term loan contracts require you to pay off the property, or you may lose it to the lender. Every arrangement differs for each loan, but the loan terms are much less than a bank’s.
Hard money loans come with high expenses, but the idea is to force you to pay them off as soon as possible. This allows the lender to get out of a potentially risky deal. The longer the loan term, the more difficult to both you and the lender.
Using a traditional lender may not be possible at first. You can use a hard money loan to bridge the gap until you are more established. Once you qualify for a traditional loan, it is best to roll over your hard money loan into a mortgage if you can’t pay it off before the hard money loan is due.
