How can I get a commercial real estate loan after buying a foreclosed house in cash?
Foreclosed homes have become a popular choice with homebuyers since they are usually offered at a discounted price. Buyers who are able to purchase the homes have an added advantage since they can bargain for an even lower asking price, and can expedite the closing of the sale.
Foreclosure properties have steep competition as there are primary homeowners who are eyeing the property and there are investors who are also ready with an all-cash offer. It is important to do a thorough investigation of foreclosed homes and enlist professional help where possible to ensure that you get the best deal possible.
Basics of Commercial Real Estate Loans
Commercial real estate loans don’t come as a one-fits-all package. Factors such as cash-flow needs, the type of property and the income form the property will all affect the loan approval.
Technically, commercial real estate loans are not secured by liens on a residential property but those on the real estate property you’re purchasing. It is therefore not possible to use a residential property, whether it is a foreclosed house or not, as a guarantee for a commercial real estate loan.
A down payment price of 20-25 percent of the real estate property is also one of the requirements that you should be prepared for when seeking a commercial real estate loan.
The commercial property you offer the lender as collateral for the loan must be worth the amount of financing you seek. The acceptability of the property is calculated using a loan-to debt ratio. The lender may also request evidence of assets or savings that can be converted into cash as proof that you will be able to repay the loan within the agreed time period.
Can You Get a Commercial Real Estate Loan by Owning a Foreclosed House?
A commercial real estate is a property that is used for a business purpose. Lenders will grant you a real estate loan if you meet the sets of requirements that pertain to the characteristics of your property, your personal finances and your business finances. If the foreclosed house you bought is for renting, putting your business or leasing, the commercial lender will carry out an appraisal to determine of it can work as security for the amount of loan you seek.