I'm thinking of starting to invest in commercial property

I just inherited a tiny plot that's in a very, very ideal spot for commercial property and was recently only considering selling it. However i've heard from several people that it would be much better if I built a warehouse or something on it and rented, etc... What kinds of loans (and terms) usually go with this kind of construction?

Edited: 06/26/2010 at 05:08AM

Barb D

Real Estate Investor · Michigan

9 posts
20 Influence

Icon_minipost May 04 '08, 06:26 AM

Hi Thomas. If you are planning to build a commercial building on your land, you will probably be able to secure a short-term construction loan that lets you use your land for the downpayment toward the cost of construction. But your lender will want to see blueprints and construction specifications in order to get an appraisal done and make sure your building will be worth at least the cost of construction. When construction is done, you'll need to get long-term financing to pay off your construction loan. This will probably require a signed lease from your tenant(s). If your commercial market is even a little bit soft (and a lot are downright squishy these days) you should have your tenant in place before you even approach your lender for construction financing. Unless you have a tenant for your proposed building, you might want to sell to an experienced developer and let him/her take the risk in this market. It's not a great time for speculative development. Just my two cents. :)

Edited: 06/26/2010 at 05:09AM

Jason F

Real Estate Investor · Gainesville, FL

299 posts
58 Influence
1 Award

Icon_minipost May 08 '08, 03:13 AM

I would talk with a commercial realtor and ask him what kind of commercial space is the hottest in your area. Does he have any large clients looking for a spot? What moves the most according to him?

If you have tenants lined up it makes this entire process easier and smoother.

Edited: 06/26/2010 at 05:10AM

Andres Garcia

Real Estate Investor · Miami Beach, Alabama

34 posts

Icon_minipost Jul 06 '08, 06:26 AM

Feasibility Studies can help you a great deal in scenarios such as this. They will research and tell you the highest and best use for your land. There are many companies who offer these services to Real Estate Investors. In my opinion it is the best first step you can take.

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Edited: 06/26/2010 at 05:27AM

James Williams

Commercial Real Estate Broker · Binghamton, NY

15 posts

Icon_minipost Jul 31 '08, 10:54 AM

With limited space, mini storage is a great low risk investment that is virtually a turnkey business. Typical rates will be 80% ltv, but this can be offset by acting as your own GC and sourcing the material yourself. Typical cost for MS is $3.00-$4.00 sq ft

Edited: 06/26/2010 at 05:36AM

Jik Hall

· Alabama

7 posts
5 Influence
1 Award

Icon_minipost Aug 24 '08, 12:07 PM

Well its very good that you are going to invest in some. There are many options to go for investing and especially when you have the good budget for that. I cannot say that for a particular investment like mutual funds or real estate [EDITED BY MODERATOR - No affiliate links]

Edited: 06/26/2010 at 05:45AM by Moderator

Howie K

Real Estate Agent

30 posts
84 Influence
1 Award

Icon_minipost Sep 03 '08, 10:36 PM

Originally posted by James Williams

With limited space, mini storage is a great low risk investment that is virtually a turnkey business. Typical rates will be 80% ltv, but this can be offset by acting as your own GC and sourcing the material yourself. Typical cost for MS is $3.00-$4.00 sq ft

I was thinking the same thing. I dont have much experience but in my opinion, a mini storage would be someone portable/ non-permanent and you could run the business or have someone else run it for you. Youre basically sitting on the land and waiting for the value to increase. Run the business and just let it pay for your expenses and taxes... Youll lose nothing (other than building costs and expenses, but hopefully youd make that back) and you will gain on the value of the land.

Edited: 06/26/2010 at 05:50AM