Nicholas Kahrilas - What is Real Estate Lending and Why is It Important?

9/29/2020

Real Estate Loans | Nicholas Kahrilas | Professional Overview

a What is Real Estate Lending and Why is It Important?

by Nicholas Kahrilas | Sep 29, 2020 | Finance, Nicholas Kahrilas, Real Estate

Those wishing to expand or renovate a property or business can acquire nancial assistance through real estate lending. These loans are similar to residential mortgages but di erent from small business loans. Typically, they are known as CRE loans.

What Are CRE Loans?

Often, people take out a mortgage to buy a house. Similarly, one can take out a mortgage and use it to purchase a commercial property. Commercial Real Estate (CRE) loans nance businesses, enabling them to renovate current properties or purchase new ones. In most cases, the CRE loan will demand the company in question to be owner-occupied. This means that it has to physically reside in 51% of the property.

On the other hand, if the property is majority owned, borrowers can get an investment loan. CRE loans are not limited; they can be used in various businesses. For instance, https://nicholaskahrilas.com/what-is-real-estate-lending-and-why-is-it-important/

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Real Estate Loans | Nicholas Kahrilas | Professional Overview

industrial buildings, apartments, restaurants, and o ce buildings can utilize CRE loans for nancing and development.

Type of CRE Loans and Their Importance Traditional Commercial Mortgage Numerous banks o er traditional commercial mortgage for various types of owneroccupied properties. Entrepreneurs who qualify for this type of CRE have substantial business revenues and good personal credit.

SBA 7(a) Loan The loan can be used to renovate an existing property, purchase buildings or lands, and construct new properties. The SBA program allows lenders to borrow up to $5 million.

Moreover, the advances are amortized, meaning the initial cost is written o over time. In essence, those who take it pay a similar amount each month until the credit is cleared.

SBA 504 Loan This loan enables long-term equipment purchases for owner-occupied real estate. The 504 advances comprise two di erent loans: one from a bank and the other from a CRE. If an individual uses the loans to purchase real estate, it should be paid back within 20 years.

CMBS/ Conduit Loans These are commercial mortgages pooled together and later sold in the secondary market to an investor. Conduit loans often range between $1 million and $3 million. They come with an amortization period of ve to thirty years, a period that can be negotiated.

Commercial Bridge Loans These loans are short-term payouts meant to “bridge the gap� as the investor waits to secure long-term nancing. Most of them are not amortized and should be paid back within six months to two years.

Real estate investors can take any CRE loan as long as they qualify. However, they should consider the collateral and the creditworthiness before they settle for a speci c CRE loan.

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Real Estate Loans | Nicholas Kahrilas | Professional Overview

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