Qualifying For Investment Property And Commercial Loans Chicago


Types Of Commercial Loans Chicago

This ARTICLE On Commercial Loans Chicago Was Updated On April 28, 2017

Looking for Commercial Loans Chicago? You have come to the right website. Gustan Cho Associates and The Gustan Cho Team are experts in commercial financing. We are a one stop lending shop and have access to every residential, investment, and commercial mortgage loan program. There are various types of commercial real estate buildings in Chicago as well as many different types of Commercial Loans Chicago available for the various properties.  Each type of commercial loan has different commercial lending guidelines with regards to credit, asset, and income requirements.

Here are the types of investment and commercial loan programs available:

Acquisition Commercial Loans Chicago

Acquisition commercial loans:

There are two types of acquisition lending.

  • Long term acquisition financing where the real estate investor purchases a stabilized investment property
  • Short term acquisition property where the investor purchases an investment property that needs rehab and/or stabilization and will either flip or seek long term financing after the property has been rehabbed and/or stabilized

Commercial Finance Programs

  • We offer both acquisition and rehab investment lending to real estate investors
  • Interest rates on commercial loans depends on the type of property and the down payment
  • Hard Money Loans
  • Short Term Bridge Loans
  • Blanket Investment Property Lines Of Credit For Investors With Multiple Properties
  • Recourse and non-recourse commercial loans
  • Recourse loans are commercial loans where the investor personally guarantees the commercial loan
  • Non-Recourse loans are commercial loans where the investor has no personal guarantee and the lender just holds the collateral on the investment property

Down payment requirement depends on the commercial property type but is normally 20% to 35% down payment depending on the risk factor and strength of the commercial loan borrower.

Acquisition And Development Commercial Loans Chicago

Acquisition and development commercial loans are commercial mortgages which are funded commercial lenders to investors purchasing an investment property that needs work. The lender will fund the acquisition plus the rehab/development costs of the project. Acquisition and development loans require an as is appraisal and an after improved appraisal. There are many different types of acquisition and development loan programs. An alternative to doing a combo acquisition and development loan, real estate investors can think about getting a hard money loan for the acquisition and once the property is stabilized, getting it refinanced for long term financing. Many real estate investors think that hard money loans are for first time investors or investors with bad credit only. This is not the case. We will further discuss the great benefits of Short Term Hard Money Loans.

Benefits Of Hard Money Loans

As mentioned earlier on this article, hard money loans are not only for real estate investors with bad credit or borrowers who are non-bankable. Hard money loans is a great tool for a real estate investor to use and benefit from it than traditional commercial financing.  Time is money and the streamline process to get a hard money loan approved and funded takes two to three weeks in most real estate purchase transactions. The negatives are that investors will pay a substantially higher interest rate and the cost of hard money loans are higher than traditional commercial financing.

Let’s take a case scenario on a real estate investor purchasing a vacant 8 unit apartment building for $200,000

  • The investor can get a hard money loan for 70% loan to value which means he needs to put $60,000 down payment and the hard money lender will finance the investor $140,000 interest only at 9% interest rate
  • The hard money lender will also finance the real estate investor the rehab cost of an additional $100,000 but the borrower needs to put an additional 25% of the rehab cost which is $25,000
  • The total down payment required on this transaction would be $85,000 and total amount financed would $140,000 acquisition and $75,000 construction costs for the stabilization and rehab of this 8 unit apartment building: Total amount financed would be $215,000
  • On this case scenario, lets assume it take six months for the apartment building investor to stabilize and rehab all eight units and rents each unit out for $1,000 per unit which means it cash flows at $8,000 gross rents per month
  • The hard money borrower now has this 8 unit apartment building stabilized and is worth $800,000
  • The hard money investor now will get end financing from a commercial lender at a 4% interest rate on a 5 year balloon commercial loan amortized for 30 years at 80% Loan To Value
  • New commercial loan will be $640,000
  • Real estate investor will pay off the balance of the hard money loan which is $215,000 and have cash of $425,000 to use for other property acquisition 
  • Real estate investor will have positive cash flow every month, $425,000 from the cash out refinance, and paid off the hard money lender
  • Investor does not need income verification or tax returns to provide hard money lender
  • Hard money loans close in 2 to 3 weeks

Asset Based Commercial Financing

Asset based commercial loans are commercial mortgages that is collateralized by the assets of the real estate investor where the lender will fund based on a loan to value set by the lender. The lender will underwrite this type of loan based on the property and not the borrower.

Bridge Loans

Bridge loans is a type of interim financing where it benefits the borrower in the following ways:

  • Bridge Loans close in two to three weeks
  • Bridge Loans are short term hard money loans where the purpose and benefits for bridge loans is that it does not have pre-payment penalties
  • Bridge Loans do not require a lot of paperwork and often times will not require a full appraisal and an environmental report
  • Bridge Loans is a great tool to use to purchase a vacant property, foreclosure, and properties that need rehab

Bridge Financing are short term loans used until the borrower and/or property can qualify for permanent financing.  Bridge loans are normally used to purchase a foreclosure, property in need of rehab, vacant properties, or properties with multiple liens or in need of stabilization. Investors use bridge loans as a tool to quickly rehab/stabilize their investment properties. Once it is stabilized, real estate investors either sells the property or refinances to long term financing with lower interest rates and terms.

Construction Loans

Construction loans are short term commercial loans given by a commercial lender to a commercial mortgage loan borrower who needs to develop commercial properties such as apartment buildings, homes, strip malls, office space, warehouses, and storage units.  Construction loans are also for property owners who need to remodel and do renovations to their existing properties.  The property, land, and other tangible assets are used as collateral to secure the commercial financing.  Commercial loans are paid off by the construction loan borrower either by the sale of the property after the construction phase is complete or when the property owner gets permanent financing when the construction project is finalized.

 SBA Loans: Small Business Administration

The Small Business Adminstration offers SBA Loans to assist small businesses in the United States to get small business loans as long as the commercial SBA loan applicants can meet SBA mortgage lending guidelines.  Small business owners can get up to 90% loan to value financing via the SBA Loan Program.  SBA loans are very popular commercial loans Chicago and was created business ownership.  Restaurant owners, grocery store owners, gas station owners, convenient store owners, hotel owners, storage unit owners can all qualify for Small Business Adminstration mortgage loans.

Recourse Versus Non Recourse Commercial Loans Chicago

Recourse commercial mortgage loans are commercial loans that is guaranteed by the commercial mortgage loan borrower where non-recourse commercial loans are commercial mortgage loans that the commercial mortgage loan borrower does not need to guarantee on the commercial loan.  For more information on commercial loans Chicago, contact Gustan Cho Associates at 800-900-8569 or text Gustan on his cell at 262-716-8151 or email gcho@gustancho.com.

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