5 Ways for Evaluating a Commercial Real Estate Investment

There are many evaluating commercial real estate investment methods, both in the market and rental values, depending on the destination and use of the property studied. Here, we bring you five ways to evaluate a commercial real estate investment.

The influence of the environment –

In the same city, we can observe differences between neighborhoods but also from one street to another. The environment, the attractiveness of the area, the district's reputation, the feeling of security, the prospects for the development of the territory: all these elements influence the final evaluation of the property.

Loan rates –

Another aspect to consider is "loan rates." Commercial real estate loans are easier to get if the property has a good location and future growth. Investing in real estate property largely depends on "loan rates." Not everyone can invest from their pocket but look for a bank loan, hard money lender, or mortgage loans. So, always evaluate the location and loan rates before investing.

By comparison (or market method) –

The so-called "comparison" method consists of deducing the property's value from the analysis of the price obtained from the recent sale of other properties as similar as possible in terms of consistency, condition, location, and qualification. This method is divided into sub-methods: "soil + construction", "integrated building land", and "by statistical regression".

By replacement cost –

On the one hand, the buyer wants to achieve "a good deal." On the other hand, the owner wants to sell at the "best price." But what is a reasonable price? The "replacement cost" method consists of reconstituting the property's cost price by deducting depreciation for obsolescence. This method is little used in terms of market value. It is more frequently used for very specialized commercial properties or to define utility or operating costs.

Consider the construction time –

Generally, newer properties tend to have a significant difference in value compared to older properties. After all, they are properties more suited to the current reality and offer better infrastructure quality. However, to know how to evaluate property properly, try to understand its time of existence. Don't forget to count on the help of professionals specialized in the subject.

How to Find a Genuine Stated Income Commercial Lender

If you are trying to buy a new property or upgrade your old one, getting a hard money loan is the first thing that might cross your mind. There are several banks that loan out money for such purposes. However, if you do not have a great credit score, then you might have to narrow down your search to stated income commercial lenders. Though there are bad credit loans available in the market, there are also a number of scammers who take advantage of an unwary customer. In such circumstances, it is essential to check if the lender is genuine or fake. Once you are sure about this, only then must you approach them for any kind of financial assistance. 

Checking the Private Commercial Lender’s Legitimacy

Before you apply with a stated income commercial lender, it is essential to do thorough research about the different lenders in your city. There are several means to check if the financer is genuine or no. Here are some ways through which you can spot potential red flags.

• Online Presence

You may get an offer for hard money loans from several lenders, the moment you start looking out. In case someone approaches you, check online for the company name and if possible, customer reviews. 

• Better Business Bureau

Every genuine company will be listed on the Better Business Bureau website. You can learn more about the lender and his company. Check for the grade and reasons for it. Reading customer reviews will also help you decide if you can apply for a loan with that particular lender. If you are not satisfied, then you can search the BBB portal for another one.

• Approach

Though lenders want to give out loans, none of them would be desperate or run behind borrowers. If you feel like the company is overtly manipulative or rushing you into applying for a loan, even before you check for facts, then it is advisable to discontinue all contact.

• State Attorney General

As a last resort, you might want to check with your state’s attorney general to be entirely sure of the business. By law, every loan broker and lender should register with a state agencies before commencing their business. If there is no record found, then you for sure are in for a scam. So be careful.

Sometimes, lenders may ask for your bank details to know where to transfer the loan amount, once the application has been approved. However, no lender will ask you for your online banking credentials. If this is the case, then it can be a fraudster who wants to lay their hands on your money. Knowing how to check if a stated income commercial lender is genuine can potentially save you from losing your money and property.

How do Stated Income Loans work?

Stated Income Loans are back in the real estate market again and this is turning heads of both the investors and the commercial real estate loan lenders. Is that a good news for commercial real estate investors? It can be! In fact, for borrowers who are self-employed and who cannot show a consistent cash flow pattern to lenders in order to get their loan request approved, stated income loans being back in the market is a great news! Borrowers no longer have to worry about being turned down by the banks and other conventional lending instructions. Stated income loans are the best safety net for any investor borrower who cannot find other forms of financing for their commercial real estate property. So, what are Stated Income Loans and how do they work? Here's a brief. 

What are Stated Income loans? 

Stated income loans are commercial real estate loans that are provided on the basis of income stated by the borrower, requiring a much lesser time period for processing and very little documentation. These loans were made illegal to be issued by lenders after the housing market crash of 2008 and the Frank-Dodd Act of 2010. However, they are back in the market now with a few changes in their approach to ensure that such a crash does not happen again, and in the best interests of both lenders and borrowers. 

How do Stated Income Loans work at present? 

Stated income loans are back and that's definitely great news for every self-employed borrower and other borrowers with poor credit scores who cannot get other forms of financing. However, they are not back just exactly how they used to be. That is, stated income loans are no longer given solely on the basis of the income that is "stated" by the borrower. Rather, such loans are now provided based on the bank statements of a borrower that proves that a particular borrower has the loan repaying ability and thus a lender can safely process the loan request. 

Thus, although heavy documentation and stringent verification of income are not needed, lenders still look for income proof on the basis of the bank statements provided and thus the Stated Income Loans are now provided under the name "Bank Statement Loans", meaning loans that are provided on the basis of the bank statements submitted. 

Stated income commercial lenders typically require the borrower to submit the bank statements concerning the transactions dating back to 2 to 3 years. If a borrower can convince stated income commercial lenders about repaying the loan based on bank statements, there's a good chance loan request will be approved.