Commercial real estate (CRE) is income-producing property used solely for business (rather than residential) purposes. Examples include retail malls, warehouses, office buildings, hotels and apartment complexes. Property owners can lease out these spaces to companies and individuals in need of extra space to rent out or store their goods.”
There are many jobs available in other consumer services. For example, a worker in the food industry can be a cashier, cook, or kitchen manager. A worker in the travel industry can be a flight attendant, tour guide, or reservations clerk. A worker in the insurance industry can be a claims adjuster, underwriter, or policyholder service representative.
There are many jobs available in capital goods. Some of the most common jobs include manufacturing, engineering, and research and development. The industry is growing rapidly, and there are always new opportunities to be found. If you have the skills required for a particular position, there is no doubt that you can find a job in this sector.
What Is a Commercial Real Estate Loan?
Just as with home mortgages, banks and independent lenders are actively involved in making loans on commercial real estate. But unlike home mortgages, which are secured by your home, commercial real estate loans rely on the value of the property itself.
There are several types of commercial real estate loans:
Piggybacking Your Loan onto Your Home Loan. This is a common way for small business owners to get financing for their business. You apply for a mortgage on your house and then take out a loan from one lender to pay down your existing mortgage.
Getting a Second Mortgage for Your Business. A second mortgage is another term for a commercial real estate loan that allows you to use your personal assets (such as your car or home) as collateral against the loan amount so you don’t have to come up with cash funds right away.
Loan Repayment Schedules
A residential mortgage is a type of amortized loan in which the debt is repaid in regular installments over a period of time. This can be any amount of time from one to five years or more.
The interest rate is based on the amount borrowed and the length of time it will take to repay the loan, which is typically called an amortization schedule. The principal amount borrowed may also determine how much interest you pay on your mortgage payments each month.
For example, if you were to borrow $100,000 over 20 years at an annual interest rate of 5 percent, you would pay $1,000 per year in interest on that loan. However, if you were to borrow $10,000 over five years at an annual interest rate of 10 percent and wanted to repay your loan in two years (instead of 20 years), then you would only have to make loan payments for two years instead of 20 years.
Commercial Real Estate Loan Interest Rates and Fees
Commercial real estate loan interest rates are generally higher than residential loans, but you can still find good deals. The factors that drive the cost of commercial property financing include the size of your project, the location and quality of your property, and the type of financing you need.
Commercial real estate loan interest rates are generally higher than residential loans because the risk is greater. For this reason, lenders often require that you post collateral to back up their loans.
Real estate investors can get better deals on commercial loans than they can on residential loans. Commercial lenders tend to offer lower interest rates than banks do for residential mortgages because they don’t want to take as big a risk with your money as they do when they lend it to businesses or individuals who can pay back their debts with regular income.
Prepayment
A key point to remember about financing a property is that you can use it for any purpose — even if you don’t intend to cover all of your costs and expenses. This means that if you need money for something else, like paying off your mortgage or starting a new business, but it doesn’t make sense to finance the entire purchase price up front, you can still get some money from your broker or lender.
The most common way to finance a commercial real estate purchase is with a line of credit (LOC). A LOC is an agreement between the borrower and lender that allows the borrower access to funds when needed. The size of the LOC depends on how much money you want to borrow and whether or not you will pay interest on the amount borrowed.
A typical LOC will contain provisions regarding interest rates, fees and terms such as payment schedules and due dates for payments. There may also be limits on how long you can take out an LOC (for example, no more than three months at one time)
Conclusion
The low interest rate environment has continued to benefit CRE and should continue to do so into 2015. The Federal Reserve’s quantitative easing has a very important and direct impact on the CRE space, with interest rates being held at historic lows. If there’s any area that still remains under priced, it is commercial real estate. Investors are still hungry for yield and demand should continue to drive growth in the CRE space.
