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Preparing your personal finances for your first commercial real estate purchase

By Greg Bell

If you are thinking about buying a commercial property for the first time, it will be critical to make sure you are putting your best foot forward with prospective lenders, reassuring them that you and your business plans represent a sound investment. As you approach the date by which you hope to own a commercial property, you will need to make sure your finances are in the best possible shape.

Just like you would when seeking a home loan, if you are looking to buy an investment property, you should prepare to do a lot of work to improve your personal finances. First and foremost, you need to be aware that lenders will require a larger deposit than they would if you were buying a residential property and that may affect your savings goals substantially, according to Commercial Real Estate. Typically, the percent of the total price a lender will want for a commercial property loan is about double that of residential, and that could be a difference of tens or even hundreds of thousands of dollars.

In addition, you may have to wait quite a bit longer for approval on a commercial loan than you would if you were purchasing a residential property.

Crunching the numbers and shopping around

For these reasons, it's important that you sit down and figure out how much you need to save to make a good-sized deposit, how long it will take you, and the impact that effort will have on other aspects of your finances. You would also be wise to look at how your finances will proceed after you buy the property.

Consider, for instance, the kind of interest rate you might expect to pay on your debt going forward and how that might alter what you need to charge for rent (or set aside to cover your costs if you are buying the building for your own future business). Of course, the rates lenders may quote to you can vary quite a bit based on a number of factors, which is why it's a good idea to shop around for the best rate.

Getting the materials together

When it comes to what lenders actually want to see as you apply for a commercial real estate loan, every one is different. However, as a general rule you should aim to collect tax records and other financial documents dating back several years to show that you are fully set up to make such a purpose and that you are a "good bet" for the lender, ValuePenguin advised. You'll also need to submit some long-term financial planning documents (i.e., cash-flow projections) for the company or site, as well as other paperwork. As stated, these requirements vary, but generally speaking, you should expect lenders to want to look at everything they possibly can.

Making the right choice

Once you have done the above, Fortune Builders recommended that you should also consider the exact type of loan you want, and make decisions based on your needs and the options that might be available to you. Making the right decision here can set you up for long-term success.

Of course, when you're looking to buy a commercial property, there's more to it than just getting your own finances in order. You would also do well to work closely with an expert real estate professional who can guide you through every step of the sales process and make sure you're putting your best foot forward at every turn. At Ray White Surfers Paradise, we have years of experience on both sides of the commercial sales transaction, and would love to put it to use for you. Get in touch with us today to learn more about what we can do for you.

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