Commercial Real Estate Finance Options for Rehab Properties

Are you considering getting into the commercial real estate market? If so, be prepared: It requires more than simply purchasing a property and upselling it to the next person, there’s a lot more hard work involved than you might realize. Before doing anything, however, getting your financing in order is the first step in the process. What are your options for financing a commercial rehab property?

Conventional Mortgage

If you own any property at all then you already know how to go through the process to purchase something with a conventional mortgage:

  • Find a lender
  • Apply with them
  • See what you qualify for
  • Make repairs to your credit score as needed

It sounds easy, and depending on your circumstance it may well be. However, the last bullet point is the one that will likely take the most time. Your credit score is everything when you’re trying to apply for a loan, and if there are negative items impacting it then you will likely need to do some cleanup work before your application is accepted.

All Cash

What’s better than a fistful of cash in hand? If you have the means to do so, purchasing commercial real estate in cash is the most ideal way to finance it. Sellers are more likely to accept an offer that is made with all cash since there are no contingencies or stipulations attached. This method requires approval as well since it is going to be written into the selling contract of the property, so don’t assume that a cash offer will be a winner every time.

Government Insured Loans

What does that mean? Well, it means a property loan that is backed by the federal government. You’ve heard of an FHA loan, right? This is an acronym for the Federal Housing Administration, and when you qualify for an FHA loan then you could also qualify for a rehab loan. If the property is in rough shape and needs some TLC, this can be a fantastic way for you to make a purchase but still plan for renovations later on.

Deciding to go into the business of purchasing commercial real estate can be an exciting endeavor, but it can also be a risky one. Understand the risks and benefits of going this route and have a clear knowledge of financing options. The last thing you want is to hit a roadblock midway through the deal because you were unclear in the way it was financed.


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