At Green Mountain Realty, we understand that Asheville NC commercial real estate financing is just as important as price and cap rate for commercial real estate investments. Unless an investor is paying cash, financing may be more important than the cap rate. An investor may spend weeks negotiating with a seller on price but spend less than a few minutes negotiating on the financing. The financing ultimately determines the IRR (internal rate of return) and cash-on-cash return. As savvy investors know, those two benchmarks are more important than the cap rate. In addition, financing decisions can affect an investor’s income taxes. The principal reduction on a loan will be different for a 20 year amortization vs. 30 years. Most investors know that principal reduction is treated as taxable income or affectionately known as “phantom income” by the IRS.
Financing on Asheville NC Commercial Real Estate
The brokers at Green Mountain Realty here in Asheville NC know that the commercial real estate financing needs to be tailored “like a suit” to the particular needs of the investor and the property involved. Does the investor want non-recourse commercial real estate financing vs. personally guaranteed? Non-recourse financing is coming back and is available on properties with “credit” tenants like Walgreens, Food Lion and others. However, non-recourse comes with a price. Non-recourse financed loans are called mortgage backed securities. Therefore, these loans usually have prepayment penalties that may be as much as several hundred thousands of dollars depending on the amount of term of the loan remaining and balance of loan. However, these loans are usually assumable. It’s a trade off.
Asheville Commercial Real Estate Financing
Two different commercial real estate properties in Asheville can have the same cap rate and the IRR can be completely different because of the financing. In addition, some investors are finding out about “the dark side” of some financing. Loan covenants can be painful. Some financing may require that the loan be renewed periodically for compliance. If vacancies have increased, borrowers may be asked to make principal reductions of hundreds of thousands of dollars or lenders will threaten to foreclose on the property. Ouch.
At Green Mountain Realty, we help investors get competitive Asheville NC commercial real estate financing proposals from several national mortgage brokers with different scenarios. We crunch those numbers with our customized spreadsheets to provide different options to our investors. Our investors make the final decision with our objective advice on the advantages and disadvantages of each proposal. Call Green Mountain Realty at 828.215.9064 for all of your Asheville NC commercial real estate, commercial properties, commercial real estate services, and for 1031 exchanges.