Selecting the ideal property may seem like one of the more difficult aspects of commercial real estate investing. However, the closing process can be just as complicated. Unanticipated fees, looming deadlines, and fears of a deal breaking down if financing is not finalized can overwhelm those who are new to commercial mortgages, as well as more seasoned investors.
In a previous blog entry, we offered invaluable insight that every applicant should know when seeking commercial real estate financing. Keep in mind, however, that just because you understand the process does not guarantee it will run smoothly and quickly.
Luckily, the entire process can be easier with one element: Preparation. By following these tips you may be able to close a commercial real estate loan more quickly, saving you valuable time.
1. Repair Before Showcasing the Property
Prior to any inspections, make sure to take care of necessary repairs, particularly those that impact health and safety codes. These include environmental issues such as mold and asbestos, oil tank contamination, electrical systems that may pose a fire hazard, and stair and deck railings that may not be up to code.
Most lenders generally require these issues be resolved prior to closing, but addressing them prior to inspection, will speed the process. In addition to repairing the property, you also should prepare it to be seen by your lender. Document the interior and exterior, and if a website is available, sharing that can be an important tool in communicating its value.
2. Prepare Proper Documentation
The loan process requires a great deal of documentation. Failure to provide reports or statements can delay closing. Specific documents you need to have available include: two prior years of profit and loss (P&L) statements as well as one for the year to date, current rent roll, and notation of any non-recurring expenses.
Since your lender will be using these documents to assess income trends, it is a good idea to write an explanation for any decline or loss. Also remember to prepare a statement of your personal finances and any real estate owned, make complete copies of your three most recent bank statements, and ensure that your sales contract is available and has not expired, otherwise you should get an extension.
Refinancing a commercial property has additional documentation requirements. If you are applying for this type of loan, make sure to gather the title, survey, insurance policy, and a payoff statement.
3. Notify Your Accountant and Lawyer Early Regarding Documentation Requirements
With the many documents that will be required for a seamless commercial loan process, make sure to alert both your accountant and your lawyer about your application. This ensures they have enough time to provide you with financial records and other statements. The earlier in the process you alert them, the easier it will be for you to ensure you have everything that is needed for closing.
What Comes Next?
Navigating the closing process can be easier when you work with a specialist in commercial real estate finance. Whether you are seeking to finance a multifamily apartment complex, office building, self-storage facility, or another type of property, the experienced lenders at Hunt Mortgage Group can help you to navigate the terms and requirements of loans for your investment property.