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Four financing options for commercial real estate transactions

Commercial properties are available and the market is strong. A recent report by the National Association of Realtors (NAR) finds commercial investment sales were growing throughout 2018. The report also notes that those who enter this market rarely have problems filling their leases. This fact, along with the reality that the commercial real estate market is generally big enough to withstand fluctuations the residential market cannot, may combine to signal a green light for many to move into the commercial real estate market.

However, entrepreneurs interested in becoming involved in the commercial real estate market will need to secure financing. As noted in a recent publication in Forbes, funding can be tricky. Entrepreneurs are wise to consider the pros and cons of various funding options before moving forward. Four specific options to consider include:

  • Commercial lending. Arguably the most widely used form of financing, an entrepreneur can look to financial institutions like a traditional bank for funds.
  • Co-investing. Find a partner, or two. Create an entity and put your funds together to finance the deal and each take a share of the company. (And, don't forget to put a buy-sell agreement in place,)
  • Crowdfunding or Private Offering. This takes advantage of recently loosened securities offering rules to allow real estate deals to be marketed online or through other channels. Often his structure also takes advantage of the support of friends and family.
  • Creative Alternatives. Other potential sources of funding include a hard money loan (secured by the property), having the seller carry a first or second mortgage, or even a master lease.

Those wanting to close commercial real estate transactions benefit from legal counsel. A common sense approach to legal solutions combined with innovative business ideas can help ensure the success of your commercial real estate transaction.

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