Analyzing Retail Properties: Commercial Hard Money Business Loans
For investors seeking funding from commercial hard money business loans to purchase retail property, it is important to due your due diligence and perform a detailed analysis of the property. In doing so, there are some important aspects to consider, some of these include:
- Price Per Square Foot: In retail, this is one of the first things an investor should look into. This is a good way for investors to compare prices to other recent sales and check to see if they are paying too much for said property.
- Be conservative with the numbers: Often is the case that the incomes quoted by either the broker or the seller are overstated and the expenses are understated. In dealing with retail, take a deeper look into the numbers and be conservative when it comes to calculating income flows.
- Replacement Reserves: This is the amount set aside each month to pay for items that need to be repaired or replaced such as roofing, plumbing, parking, etc. Setting up a reserve account ahead of time is a wise move when purchasing retail.
- Parking ratio: If you do not have enough parking for your retail operation, it could spell trouble in the future. The standard parking ratio is four spaces per thousand square feet.
- Consider Class: All commercial properties fall under a class structure including class A,B,C, or D. Each of these classes factor in how new, location, high en features and so on with class A being the gold standard, and D being the lowest quality.
- Check with the lender: Before digging too deep into the specifics, consult with the lender and present the financials and attributes of the property. Chances could be that the lender is not comfortable with certain types of retail operations. i.e. video stores, laundry mats, smoke shops.
Contact the specialists at HML Investments for further information about commercial hard money business loans