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Factors to Consider When Choosing a Commercial Lender for Property Investment

02/22/2023

Choosing the right commercial lender is crucial when investing in property. In a competitive market, delays caused by slow lenders can lead to missed opportunities. You’re competing with a number of other people for a purchase, and a seller could run out of patience waiting.  

Additionally, commitments to properties can result in interest and penalties if settlement dates are extended. To avoid these risks, it’s essential to plan carefully and select a lender that can provide the right financial solutions for your property investment needs. 

In this article, we’ll discuss the factors to consider when choosing a commercial lender for property investment to help you make an informed decision and minimise the risks involved.

Experience

When planning to get a commercial investment loan, you need to choose a lender who has a good track record in commercial property lending. Look for a lender who specialises in commercial lending, has a proven track record of funding commercial property loans and has experience in your specific property type.

The experience of a potential lender is crucial because commercial property lending is a specialised field that requires in-depth knowledge and expertise. A lender with experience in commercial lending will understand the unique challenges that come with financing commercial properties, such as zoning and occupancy requirements. They will be better equipped to provide you with a commercial investment loan that meets your specific needs.

An experienced commercial lender will also have a good understanding of the local real estate market and can provide you with valuable insights into property values and market trends. They can help you assess the property’s potential income and ensure that your investment is viable.

Moreover, an experienced lender will have established relationships with other professionals, such as appraisers, inspectors and title companies. As a result, they can streamline the lending process and save you time and money.

Loan terms

It’s important to pay attention to the loan terms when you’re looking for a lender for your commercial property investment. These terms can have a big impact on the success of your investment. They are just as important as the lender you choose, so take your time and choose carefully. 

You want to find a lender who offers competitive rates and flexible repayment terms that work for you. You should also look for a commercial building loan that’s tailored to your specific needs, so you can get the funding you need to make your investment a success.

Here are some reasons why you should consider loan terms:

  • Interest Rates

The interest rate is the cost of borrowing money from the lender. The interest rate you receive will depend on the lender’s underwriting criteria, your creditworthiness and the property’s risk profile. A lower interest rate can result in lower monthly payments and a lower overall cost of borrowing.

  • Repayment Terms

Repayment terms refer to the length of time you have to pay back the loan. Longer repayment terms can result in lower monthly payments, but may also result in higher interest costs over the life of the loan. On the other hand, shorter repayment terms can result in higher monthly payments but may result in lower overall interest costs.

  • Prepayment Penalties

Some lenders may charge prepayment penalties if you pay off the loan early. You need to know the terms of the prepayment penalty, as it can impact your ability to refinance the loan or sell the property.

Loan-to-Value (LTV) Ratio

If you’re planning to get a commercial loan in Australia, one important thing to know about is the loan-to-value (LTV) ratio. This is the amount of money you want to borrow divided by the value of the property you want to buy.

Knowing the LTV ratio is important because it affects the interest rate you’ll be offered. Generally, the lower the LTV ratio, the lower the interest rate, and vice versa. Lenders use the LTV ratio to assess the risk of lending to you. A high LTV ratio means the lender is taking on more risk, whilst a lower LTV ratio means there is less risk.

For example, let’s say you want to buy a property worth $1 million, and you want to borrow $800,000. Your LTV ratio would be 80% (800,000/1,000,000). If you can come up with a larger deposit, say $400,000, your LTV ratio would be lower at 40% (400,000/1,000,000), which would likely result in a lower interest rate.

Knowing the LTV ratio can also help you budget for the loan for commercial property, as you’ll have a better idea of how much you need to borrow and how much deposit you need to save up.

Speed and Efficiency

Time is of the essence when it comes to property investment. This is why when you’re getting a commercial real estate loan in Australia, speed and efficiency are important. So look for a lender who can process your commercial loan application quickly and efficiently. 

Here’s why:

Firstly, the real estate market can be really competitive, so speed is key. If you find a property you love, you need to move quickly to secure it. There may be other buyers interested in the same property, and the seller might choose the buyer who can act the fastest. If you can’t secure financing quickly, you could miss out on the property altogether.

Secondly, efficiency helps you save time and money. If the loan process takes too long, you might have to pay additional costs, like extension fees or rate lock fees. Plus, the longer it takes to close the loan, the longer it will take for you to start earning money from the property. That can hurt your cash flow, which is no fun!

Lastly, working with a lender that’s speedy and efficient can make the whole experience less stressful. With a streamlined loan process, you can avoid a lot of headaches and focus on other important parts of your investment.

Fees

A commercial loan can come with fees, but different lenders charge different fees. So look for a lender who is transparent about their fees and offers competitive pricing.

Some common fees you might encounter include application fees, valuation fees, legal fees and ongoing service fees. These fees can add up quickly, so you need to understand them and factor them into your budget.

Make sure you ask your potential lender about any fees that apply to your loan and what they cover. This will help you avoid any surprises down the track.

Reputation

You want to find a lender who has a good track record of providing quality service and meeting the needs of their customers. Reading online reviews, asking for recommendations from others in the industry and doing your own research can help you find a reputable lender.

A lender with a good reputation will be more likely to provide you with competitive rates, flexible loan terms and excellent customer service. Also, working with a reputable lender can give you peace of mind knowing that you’re in good hands throughout the lending process.

Customer Service

Good customer service is essential to ensure that your commercial loan application process goes smoothly, and any questions or concerns you have are addressed promptly. You want to work with a lender who is easy to communicate with and is responsive to your needs.

A lender with excellent customer service will be more likely to provide you with a personalised approach to your lending needs. They can help you understand the terms of your loan and guide you through the application process step by step.

Additionally, a lender who provides good customer service can help you build a long-term relationship with them. This can be beneficial if you plan to invest in commercial real estate in the future, as they will already have an understanding of your needs and preferences.

Start Your Property Investment Journey with InvestorFi

At InvestorFi, we specialise in commercial lending and have helped countless investors secure the financing they need for their property investments. Our team of experts has extensive experience in the field and is committed to providing our clients with the best possible service and support.

If you’re ready to take the next step in your commercial property investment journey, get in touch with us at InvestorFi. Our team is always here to answer your questions, provide guidance and help you find the perfect loan solution for your needs. Contact us today and let’s get started!

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This is what we do.

We are finance strategists in the Mortgage Broking industry, helping Australians build wealth through property investment.

Our sole purpose is to reinvent ways to keep the Great Australian Dream Alive. Because we believe it’s everyone’s right to the security home ownership affords our families and community. Yes, our niche is Finance Strategy for Property Investors, but it is not what we do that makes us tick;
it’s

Because property investment is a decisive step toward financial freedom, we cultivate lasting relationships with our clients. We ain’t just a ‘whame bam, see ya later man’ kinda outfit. In fact, our business is built entirely from our lasting relationships with our clients who have suggested us to their inner circle – their family and friends. That is a pretty big tick of approval and a sure vote of confidence.

This is How we do

What separates us from the rest?

Have you ever considered the difference between Mortgage Brokers?

A Broker worth their salt has a playbook of ‘scenarios’. They are finance strategies that have worked in the past. He will offer up one, two or even three scenarios that he thinks will work best for you. 

But the great ones challenge the status quo, strategising new plays that serve your unique situation and financial goals. They will study, visualise, and fine-tune before offering only the best scenarios that build a rewarding property Portfolio.  

They never let good be the robber of the best and only play to win!

InvestorFi is a group of finance strategists that will design a unique scenario for your state of play towards your long-term game plan.

But don’t just take my word for it.

Clients like Tony F. said: I couldn’t be happier with the service. Wayne was excellent in guiding me through and delivering a great investment loan. Very responsive and savvy investment brokers. Will continue to use their services in the next purchase. 

And like Kim, Wayne is extremely dedicated, professional and a pleasure to work with. He worked tirelessly to help me secure an alternate lender before the settlement date and was extremely prompt and clear in his communications with me. 

And 

Robert wrote: Wayne is always very responsive and takes the time to lay out all the options in plain English.

Reviews like this make our souls sing. We’re in the business of helping people achieve real results that last!

So if you’re looking for a great Finance strategist like these incredible clients, you’re in the right place.

This is why we do

Gone are the days a single income could afford 2.5 kids, a pet, and a four-bedroom house in the burbs! 

At InvestorFi, our sole purpose is to reinvent the great ‘Australian Dream’. Because we believe it’s every citizen’s right to the security home ownership affords our families and community, not just for today but for generations to come.

But because it’s become so difficult, it requires complex solutions. One way is to seek finance strategy before purchasing a home. This way, you can leverage your full potential to live where you want to and invest where you can afford to. 

Property ownership has become a game of ‘finance strategy’, placing a premium on finance know-how. That is why we value education; our mantra is knowledge equals freedom, but knowledge shared is freedom multiplied.  

There is no drought; we have hit a new era with its epic challenges. Not everyone is up for the grind it takes to keep the dream alive. That’s why we also place a premium on camaraderie. We don’t see ourselves as a ‘hit and run’ service but as a hub and a way of life.