Commercial Loans Offer Tremendous Benefits Over Residential Loans

The next time you set out to find a good investment, consider the loan benefits provided by investing in commercial property. Both commercial and residential loans can result in providing the money you need for your investment property. However, there are benefits you can gather from using a commercial loan over a residential one.

One key benefit is asset protection. With commercial loans, you can acquire the loan through your business. If you use your company name in order to procure and use the loan when investing in a property, your assets will be protected. If you get a residential loan in your own name and later have a hard time making the mortgage payment, you may run into the problem of the bank wanting to come after the house you live in order to recoup their loss. This may be true of any personal asset that you have. If you have a boat, a summer home, expensive jewelry, automobiles, any of these things can become subject to claim if you’re not able to make the mortgage payments on your investment property that you received through a residential loan. As a commercial investment, the bank will be able to go after the property itself and assets owned by the business only. Your personal assets will be protected.

Another key benefit is how the loan is qualified for approval. When you apply for a commercial loan, you are applying for the loan based on the strength of the value of the property you are investing in. This means that less emphasis will be placed on your personal financial statement and situation. Some banks, when applying for a residential loan, will give you trouble if you are mortgaged out on another property or several other properties. You may have a hard time getting a loan even with perfect credit because the bank will see how much money you owe in other properties and they won’t see the fact that you’ve successfully made those payments for months or years.

The commercial loan opportunity will make sure that the bank looks at what the value of the property being bought is rather than how much property and money you have invested elsewhere. As long as the value of the property will cover the loan if you default, you should have little trouble in being approved for the loan. Therefore they will be emphasizing the value of the property rather than the credit worthiness of the investor.

A third benefit is the lack of a “trail” on your personal credit report. A commercial loan is often not included on your credit report. If the purchase has been made under the company name and there is a personal guarantee of payment of the loan, the investment will likely not be reported on your personal credit report. This means that your credit score will remain high when you decide to make another investment. Your personal credit report will not be fraught with properties that have been bought and sold through your business. Those properties will likely not show up on your personal credit report at all and you will not have to worry about being hassled because you have money tied up elsewhere. You should be able to get a loan for a home or boat or vehicle without any trouble.

If you’ve primarily invested in residential properties and aren’t sure about the alternative, there are some things that may help you stay in your comfort zone. For example, instead of investing in a home, repairing it and reselling it for a profit, think about purchasing a six-plex apartment building. This will put you into the field of commercial property without having to completely leave the field of home repair. You may still choose to fix up the units and resell them for profit, or you may decide to keep the property and gain your profits from the tenants. You will be taking on the responsibility of a landlord, but you will have fabulous profit potential this way.

Sometimes you will find residential looking properties that exist on land that is designated commercial properties. These can be bought and revamped for use in a commercial environment. These properties can be resold or leased to a business owner that is looking to open a business in that location. Again, you will be able to take a commercial loan for this property and gain the benefits of a commercial loan from the bank or other lending source.

Commercial loans will afford you several opportunities that would not be available to you with a residential loan. Your personal belongings and investments will be protected. The risk that you take will be a risk to your business alone. The profits are greater in the commercial sector and you will benefit from them as you leave the residential world behind and enter a new phase of your business career.

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