California has some of the hottest real estate markets in the country. Commercial real estate investors are facing rising rates which may cause a shrinking capital market from traditional banks. Here are some creative avenues to raise money for your next commercial real estate investment:
1. Seller's Carry - this is when the seller acts as a 'bank' - the buyer purchases the property with a lien held by the seller in return for interest payments. Sellers who are not in a rush to get all the purchase price or sellers who want to expand the pool of buyers use this strategy. It can be a very effective tool for buyers with capital challenges to acquire real estate.
2. - private lending has emerged in the last few years due to the rigidity in old-school lending world. Private investors will lend capital to purchasers and secure the loan with a deed of trust on the property. Unlike a bank loan, this is a fast and more flexible process that focuses on the asset, not the borrower.
3. - sometimes real estate investors need a short-term loan for less than 12 months - this is where bridge loans come into play. The rates on mezzanine loans is higher than a regular loan, and the terms is usually 12 months or less, but fast approval and aggressive LTV means maximum capital available for investors with a plan.
4. Option to Purchase - buyers who want to wait and see where the market goes can opt for a creative legal tool that allows them to lock up a property instead of outright buying it. Buyers can secure a price point for an extended period of time (usually a few months and up to 2 years or more) and sellers can extract more value out of their property by charging a premium. Options to purchase a very powerful contracts but note that title only passes after you purchase the property and exercise the option, so the benefits of the property are not available right away.
If you need assistance in securing capital for your next creative real estate investment, we can help! Hard Moola is the ultimate hard money blog with tons of resources to help you make your next investment a reality