Tuesday, March 29, 2016

Essential Notes On Atlanta Commercial Real Estate Finance

By Tom G. Honeycutt

Commercial real estate entails dealing with warehouses, office buildings, retail stores, and other business buildings. The value of a property is computed by estimating the income it is likely to bring to the owner. The income value has been used in the industry for a long time. Capitalization rate is a figure that is use to represent the actual value of a property and the income it is expected to produce. The Atlanta commercial real estate finance enables business owners to buy properties such as building or open land for development purpose.

Real estate investors turn to banks and independent lenders for loans. Other sources of capital include insurance companies, private investors, and pension funds. The requirements for securing the loans are similar to those of private loans. Therefore, the business must possess an exemplary track of record in payment of loans sourced from reliable lenders in the industry. In addition, a proof of income must exist and the businesses adhere to the set loan-to- value rates.

Investors are offered diverse financial options by financial institutions in case their credit worthiness is confirmed. They receive the loans through the conventional plan. Those that do not have enough evidence to support their credit worthiness are forced to turn to the government for financial help. With the different options available for selection, conducting a thorough research is a wise decision. New business entities need to present financial information of their owners.

Commercial loans have unique terms compared to their residential counterparts. Their term may range from a five years to twenty years. Additionally, the amortization period happens to be longer than loan terms. The loan term length and amortization duration interferes with the lender charges. However, the terms of the deals is can be negotiated.

The interest rates associated with these loans are significantly higher. The overall loan cost includes fees like loan applications, appraisal, loan origination, and survey fees. In addition, some fees must be settled up prior to loan approval. Other charges are added to the debt annually.

To eliminate instances of investors paying the loan before the recommended time, restrictions are put in place. The restrictions preserve the interest of the lender. In case an early repayment is opted for, repayment penalties will apply.

Mostly business entities purchases properties, leases them out to other business, and collects rent. The properties are leased out in order to generate income. Therefore, a lender must consider the amount of income collected, credit worthiness, financial statements of three to five years, and financial ratios.

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