– Understanding Mortgage Loans for Retail and Strip Shopping Center Financing
If you are planning of starting or buying a strip shopping center, you can approach a lending institution and get a mortgage. Many renders will give you three types of loans: refinance, purchase, and construction.
Refinance: this is where you convert your static, illiquid equity into cash. You should then use the cash from your equity for expansion, remodeling, or other real estate investments that you are interested in.
Purchase: here you need to approach a lender and you will get a loan that will help you in buying a new strip shopping center.
Construction: do you want to construct your own retail store from the ground? The construction loan is the right one for you. Many lenders will give you an A$D funding for the land and construction money to raise the building. Once you are through with the construction, some lenders will give you money to stock your store.
Features of mortgage loans for retail and strip shopping centers
The loans have a number of features which include:
- LTV to 80%
- Fixed interest rates for up to 25 years
- Interest only payments
- Low third party closing costs
- Closing of 30-60 days
- Low debt service coverage of 1.1-1.2
- Amortization periods of up to 30 years
Points to note
It’s good to note that many banks and commercial lending institutions tend to turn down requests for smaller loans for strip shopping centers. To ensure that your application goes through its good that you request a large loan.
If you are new in the strip retail shopping center business, it’s good to note that the venture is profitable; however you need to invest a lot of money. When investing in the business you need to consider a number of factors such as repairs, insurance, advertising, permits, taxes, labor and construction.
Although, strip retail shopping center loans had died a few years ago, they are quickly gaining popularity. Many people are going for the mezzanine (subordinate) loans. The good side with the loans is that they attract lower interest rates and give you a longer paying time.
It’s good to note that it’s usually challenging to find the right financing terms on retail strip shopping center mortgage loans. To increase your chances of getting the right terms it’s good that you work with an experienced agent. A qualified loan agent will not only give you the advise that you need, but he will also help you with the loan application.