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Arranging Commercial Capital in Today’s Market

FHA Loans For Commercial Real Estate!

Arranging Commercial Capital in Today’s Market

by Irving J. Diaz

FHA Loans


One of the most daunting challenges commercial real estate investors face today is having the ability to arrange the financing they need in order to capitalize on the available opportunities. Fortunately, financing is available to smart investors who partner with the right lender to take advantage of often underutilized government programs and effective investing techniques.


For investors with an interest in multi-family commercial properties, there are two government programs available depending upon whether their areas of interest are with new construction projects, the acquisition of existing properties that need to be rehabbed, or acquiring existing properties that are not in need of rehabbing.


FHA 221 (d)(4)


In today’s market, investors can face significant challenges in locating construction capital for multi-family building projects. Because of the risks inherent to this sort of project, most lenders will require that borrowers have significant cash resources that they can bring to the project, often as much as 30%-35%.

Because of this, the FHA 221(d)(4) program is becoming a much more attractive means of attracting the financing necessary to complete these types of projects. By participating in this underutilized program, investors can receive up to 90% loan to cost construction financing, which frees them to use their cash for other purposes or to complete even more deals.


The FHA 221(d)(4) program

isn’t limited to new construction projects. Investors can also use this innovative program when they are acquiring properties in need of substantial rehabbing in order to ready them for occupancy by tenants. While this program places a number of requirements on participants, commercial real estate investors are increasingly embracing it as an excellent way of obtaining the resources they need to complete their projects while minimizing the cash necessary to invest in today’s market.


FHA 223(f)


Another government program that has become increasingly popular for commercial real estate investors is the FHA 223(f) program. Investors can use this program to finance up to 85% of the loan to value on commercial properties that won’t need substantial rehabbing. Another benefit to the FHA 223(f) program is that loan terms can go as long as 35 years, so there’s a great deal of flexibility, depending on the needs of the investor – and the project.


While these two programs aren’t funding sources, they are federal loan guarantee programs. Just like any other government program, there are government restrictions, limitations, and other requirements placed upon investors taking advantage of the benefits given by participating in these programs.


Commercial loans are fundable in today’s market, but it’s important that investors know where to look – and how to take advantage of all of the tools available to them. This includes thinking outside of what others may consider normal and customary. For instance, investors that have equity may have the ability to perform equity swaps instead of cash down payments on some loan types (depending upon whether the loan is government-backed or is considered more “traditional”.


Regardless of the type of financing commercial real estate investors are seeking, it’s important that they partner with a broker/lender who has been around the block more than once or twice. Experience can pay huge dividends in terms of the sound advice that can be offered as well as the ability a seasoned broker/lender can have to properly analyze a real estate investor’s needs and develop a game plan that will help to maximize profitability on deals.


About The Author:

Irving J. Diaz is the Senior Managing Director of SouthOne Capital; a commercial real estate finance and brokerage firm in Miami, FL. He is a Licensed Real Estate Broker and Licensed Mortgage Broker with over 16 years of experience and holds a Bachelors degree in Business Administration from Florida International University.

For more information: (888) 800-3126 | http://www.southonecapital.com


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