Another installment of my column in the Orlando Business Journal — part 1 of 2 . . .
10. Get organized — most competent lenders can give you a checklist of their needed documents immediately. Full documentation loans (like the ones we specialize in: 504’s) are worth spending the extra time on in order to shave a couple hundred basis points (100 basis points equals 1.0%) off interest rates. This will add up to tens of thousands of dollars, if not more, over the life of your commercial loan.
9. Get pre-approved — this saves you time by knowing what you can afford to “shop” for. There is no sense wasting your time looking at $3 million buildings if you can only afford a $300,000 one. We have gotten very efficient and accurate with these (assuming you provide just the 7 documents we need to examine), issuing them in as little as 12 hours, but always within a day.
8. Know the market you’ll be buying in — use a knowledgeable commercial realtor to find your new property. If you’re like most business owners, you don’t have time to go on endless drives shopping for a building. A competent commercial realtor can save you time by finding you property that exactly fits your needs or can be renovated with ease to work for you. Plus, they can give you comparable sales/lease rates in the area, demographics, and plans for growth.
7. Consider low down payment and longer-term loans — this preserves your capital for better utilization, keeps your cash flow high, and allows you to redeploy the “capital savings” into other profit-generating business activities. Small business owners no longer have to put down 20% to 30% or accept 15-year amortizations with short-term fixed rates that balloon from ordinary lenders to get a “good deal.” The commercial loans we specialize in are a perfect antidote to those ordinary loans. The key point here is to actually do something with the “capital savings” you get from only putting a third to half as much equity down and getting up to 25-year terms.
6. Buy commercial real estate for the “right” reasons — if your likely exit strategy someday is not an IPO, but rather selling or simply closing your business, then it makes great sense to “pay yourself rent” rather than some landlord. As soon you have the capital for the down payment, you should consider turning that rental payment into a mortgage payment that will at least give you something for your effort — just like buying a home instead of renting an apartment. By doing this, you no longer will be throwing away your lease payment monthly, but building equity in an appreciable asset that also offers multiple tax advantages and income-sheltering opportunities not available with leasing. Stop paying your landlord’s mortgage and making him wealthy! Do it yourself!
Stay tuned for the second installment — the other Top 5 Things to Do — in next week’s issue.
Best Wishes for More Successes,