The various sources for funding your real estate venture are listed below. This is most definitely not the comprehensive list but rather to help you understand and give you a fair idea on what is around and how things work.
Mortgage banking companies- They are experts in providing and servicing mortgage loans. Very few people have liquid funds or enough savings to invest in property outright hence people fund their house purchases or security against estates through mortgage loans provided by mortgage banking companies. It is a type of loan to purchase real estate usually with agreed and specified payment periods and interest rates. Normally the borrower gives the lender legal claim against the property which is kept as a collateral against the loan taken.
Banks- Banks do provide various loans pertaining to commercial estate financing, With varied rates of interest and varied terms, the rate of interest are decided on various factors.
Private investors- Since real estate funding requires heavy amounts of money, the returns can be great too. This attracts lots of private investors looking to earn quick, easy and huge amounts of money with time. Normally private investors don't worry much about collateral and documentation, rather they are more concerned about the returns that the estate would bring along with time.
Commercial financing depends on many factors. Prices, interest rates and term payments may depend but not limited to some of these factors stated below.
Size of the property- The price and interest rates definitely depend on the size of the property. The price and the size of the property is directly proportional to each other. The larger is the size of the property, the greater is the price of the property, not always though. It may vary among different geographical boundaries.
Type of property- The type of property also plays a factor on deciding the price. The property can be warehoused or retail operations or apartments for living. In each of these cases the prices differ based on residential estates and commercial estates.
Geographical Location of the property- Geographical location can also be a huge deciding factor. If the area is one of the well known places where everything is available at a stone's throw, you can be very well aware of the high prices those properties will attract. If the property is farther away then the prices are comparatively lower.
Expected use of the property- If you are using the property for commercial ventures then the prices will be based on the future value that the business might bring in. In case of private homes, the value is generally based on the price of the house.
Market situation- The increase and decrease in real estate financing is also dependent on the market conditions. If the demand is more then the prices are high whether the other conditions are fulfilled or not,. In case of lower demand, you can definitely bargain for a better deal.
It is important that you understand the rate of interest that you would be paying along with the specified terms of payment and conditions. Normally property rate are charged on an amortization rate as in on an advance basis. Since the prices of fixed assets such as real estate keep on increasing, it is always best to invest in real estate for future prospects. The real deal in commercial real estate funding is to find a lender who meets your requirement of business and then helps you grow with time. You should be careful as to not to get into an agreement which does not help you grow as a businessman in the long run.
Ritesh Das, an MBA in marketing and finance, is a writer by choice. He has his own way of telling stories and tries to make "hard to understand things, simpler." He is a blogger,a dreamer, a wannabe photographer and yes an upcoming writer. He has been writing for 2 years now and has deep interest in finance and small business loans in particular.
