Have you ever wondered how someone in commercial real estate managed to extend their portfolio so quickly? Well, the secret lies in refinancing. Refinancing in commercial real estate offers you tax-free cash from the investment for repairs or renovations. This strategy ultimately increases your cash flow, ROI (Return-On-Investment) as well as your cash-on-cash returns.
Residential and Commercial Real Estate refinancing transactions are generally undertaken for different purposes. While people undertake residential real estate financing for personal purposes such as renovations or to pay off debt, commercial real estate refinancing helps to generate income. The income generated is what underpins the value of the property. This value then determines the terms of the loan offered by lenders.
Most people are familiar with residential refinancing. However, most people have numerous questions about this process. Some people are concerned about how residential refinancing affects their credit or whether it is wise to refinance their house. While a real estate agent would be in a position to address some of these questions, a real estate lawyer is the right person to contact.
Read on to get shocking revelations about residential, commercial real estate, and loan refinancing transactions from Steve Patti.
But first, let’s introduce you to Steve.
Steve Patti: Bio
Steve Patti is the CEO and Founder of First National Title & Escrow. The company specializes in residential and commercial real estate. Steve and his team of experts examine titles and close real estate transactions. Some of the activities they undertake include residential and commercial real estate purchases, and loan refinancing transactions.
Steve is a serial entrepreneur who specializes in real estate. Aside from First National Title & Escrow, he founded FastClose. Fastclose is a cutting edge platform that empowers customers by taking their closing transactions online. This strategy is not only convenient but also cost-effective.
So far, Steve has helped thousands of clients close their real estate transactions locally and nationally. He is a thought leader in real estate knowledge and insights and has built his company into a national brand that delivers a great experience.
Residential, Commercial Real Estate & Loan Refinancing
One of the main reasons that people refinance their commercial or residential real estate is to reduce financial strain. Others may refinance to increase their mortgage term or to access equity for home improvements.. For commercial real estate owners, refinancing is an excellent way to tap into investment equity. Regardless of the reason, there are four main factors that clients need to know:
a). Refinance money is tax-free: Whether you want to buy a boat or take your kids on vacation, refinancing is a way to get tax-free cash. You can use this cash for anything you’d like.
b). It’s a great way to invest in property improvements: If you own commercial real estate, then I am sure you’ve realized that it has become increasingly difficult to get money for repairs. Whenever you collect rent, you generally pay down your original mortgage. However, refinancing is a great way to access the money you need for repairs. For instance, if you have real-estate worth $80 million. You may be able to pull $5 million in cash from refinancing your loan. You can use this cash to improve the building.
c). Lower interest rates: Refinancing can lower your interest rate by 1% or 2% in commercial real estate. The general rule of thumb is to refinance your property only when you can reduce your interest rates by up to 2% or more.
- d) Extend your investment portfolio: Refinancing your property is a strategy that helps you grow your real estate portfolio. This strategy is commonly known as “leveraging.” For instance, let’s say you purchased a commercial apartment in 2001 that’s worth 2.5 million. By 2015, you decide to refinance the property as it is worth $5.5 million. You can take out a mortgage loan that will pay out the outstanding balance of the original investment ($550,000). This leaves you with enough leftover cash that you can use to purchase another property. In the long-run, leveraging equity from your original investment helps you increase the number of properties that you can accumulate and increase your net worth.
The process of refinancing requires you to have an expert by your side. You need a real estate lawyer who will handle the transaction and ensure that your interests are protected. If you are interested, then you can reach out to Steve. Steve’s company always provides a great experience to clients.