Finding Financing for Your Commercial Real Estate Projects
Starting a project in commercial real estate can be a daunting challenge. The first hurdle many people encounter is finding sources to finance such a large endeavor. While investing in real estate might seem adventurous to some, to others it is a costly and risky process. Fortunately, there are alternative methods than conventional bank loans to find funding. While not the traditional route, these options provide you with the safety and security you need to move forward.
Working under syndication is an excellent option for those who wish to work with a group of investors. In this scenario, a group of investors pool their finances to fund the initial bank loan or loans. Then, as a return on their investment, they receive a continued portion of the profits, or finalize their interaction with a specific monetary return. Each individual party involved has the opportunity to invest in a project larger than they would have been able to alone.
Another similar alternative is crowdfunding, where an initial proposal is submitted and any interested party can buy in to the investment. Usually organized online, this allows the originator of the project to expose the idea to a broad spectrum of potential investors, allowing it to be funded much more quickly than otherwise possible.
Sometimes the seller of the property may want to invest in that location’s future. Seller financing allows them to stay involved in the development phase while at the same time postponing or lessening tax burdens associated with it’s sale. While they have the opportunity to see their former property grow, you get the benefit of borrowing from the seller directly, which is often less expensive than traditional commercial real estate loans.
For those who are starting a new project while thinking of selling a property of their own, an equity trade provides a perfect source for alternative income. By investing equity on a property that is currently on the market, an investor can have access to funds before they would be able to normally. This allows developers to move on to newer, more exciting projects before the sale of their previous endeavors have finalized at a much lower cost.
There are a multitude of ways developers can find funding for their commercial real estate projects outside of the normal channels. While bank loans are a tried and true method, it is important to remember that there are many alternatives at your fingertips. Take the time to find a method that suits your particular situation, and you’ll be one step closer to making your next real estate project a success.