Feels Like 100% Financing

Many real estate professionals that invest mostly in residential housing are reluctant to even attempt to enter the market for small commercial. This is because they have a perception that it is very expensive to get into commercial properties.

Well, that may not be exactly true. It actually costs about the same in terms of percentages to get into commercial as it does residential. Think about it this way. If you have 10 loans at $100,000 you have a million dollars in loans. If you paid 3% to close each transaction you've actually paid $30,000 in fees, about the same amount you would pay to close one $1,000,000 loan.

Others decry the 'large' down payment required to acquire small commercial property. But now, the out-of-pocket cost is less to get into small commercial than in most residential transactions. This is because of the flexibility of small commercial lending.

There are lenders that will allow investors to cross-collateralize loans. This feels like 100% financing to the investor. Cross-collateralizing works in a combination of ways. In most cases the lender will put a loan on equity in other property to use as a down payment on the property being purchased. In some instances real estate with equity acts as additional security in the loan along with the property being purchased and all the properties are secured under the same 'blanket' loan.

These strategies along with more advanced lines of credit, like the ones that are available for loans against stock and mutual fund portfolios, can be used to provide real estate investors with financing for new projects without having to liquidate cash assets. With small commercial real estate investors can have a 100% financing experience. That is something that is not currently available for single family residential real estate investments.