The pricing and costs of real estate finance are dependent on lender's fees, but most costs are to be expected. Developers and investors may compare several lenders and financing options to find the most affordable loans for their investment.

Some costs are expected in real estate finance, including interest rate charges. Other fees are more expansive, such as those for development property. In all cases, investors will want to consider all sources of funds to compare loans from, including:

1. Obtain commercial real estate finance from standard banks and mortgage lenders.

2. Seek out business real estate lending from private lenders.

3. Notice opportunities for real estate development financing from partnership companies.

Action Steps
The best contacts and resources to help you get it done

Know the cost of real estate business financing interest costs

With most loans, the largest expense will come from interest charges. The cost of interest on real estate investment loans differs depending on the amount of down payment, the credit score of the borrower and the lender. Comparing loan interest rates is the largest factor in saving money. Current interest rates range from 4% up to 8%. These rates change often.

I recommend: Compare interest rates for commercial real estate loans from various sources. Bankrate offers some comparisons of mortgage rates for residential properties, good for investors looking to purchase residential property for investment. Steelhead Capital offers an ongoing comparison of the latest rates in the commercial real estate sector. LoopNet lists commercial real estate loan quotes from various lenders. They track news and market trends as well.

Price the additional cost of commercial development financing

Real estate developer finance has additional costs. Since these properties will be developed, expert analysis of the property's value at the completion of the project is taken into consideration. The value of the building and land after development is completed needs to be estimated by professionals. This additional cost has to be accounted for. Additionally, one must factor the cost of construction into the loan pricing. This analysis cost may range, but generally cost less than one percent of the property value. Appraisal costs add between $500 and $2,000, depending on the size and type of property.

I recommend: Determine the cost of land development financing in detail. A combined effort by the lender and the borrower's appraisal and development team will help to establish the loan. Commercial Property Appraisal offers guidance and online support for valuation and appraisal of commercial real estate. Income-based and comparable-based valuation is available. Real estate agents also provide assistance in property valuing. Companies like RE/MAX help investors determine the value of the development property.

Learn real estate finance and investment costs such as agent fees and closing costs

The real estate finance company will add additional costs to the loan. Closing costs can be between 1% and 4% of the property purchase price. Closing costs include loan origination and underwriting costs. Consider agent fees as well. Real estate agent fees can be as high as 6% of the sale price of the property (though not of the loan itself).

I recommend: Talk to the lender about lender developer funding and commercial property purchase fees prior to establishing the loan. Companies such as Coldwell Banker Commercial will outline costs of working with you to establish the property purchase. CommercialBanc provides lenders with an estimated cost for closing costs, including what is covered in these costs. Additionally, use the commercial loan calculator to get a specific estimate for your potential investment.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Real estate finance and investments can be expensive transactions. For this reason, many investors and developers hire commercial real estate consultants to help them locate properties, agents and lenders with the most affordable rates.

If you're looking to finance your company's new home, you face a wide variety of commercial mortgage options. Decisions include how much you'll need to finance, whether you want a fixed-rate or adjustable-rate loan, and whether to stretch the loan for as little as three or as long as 25 years. A commercial mortgage broker can help you navigate this complex process. A broker works with numerous lenders to help you find the best deal. A commercial mortgage banker's role is similar, although it typically represents a more limited number of lenders.

Here are some tips for dealing with commercial mortgage brokers:

1. Shop around. Ask for referrals and meet with at least three to find a broker who understands your business.
2. Rely on your broker to find the loan that best fits your needs.
3. Expect to pay an application fee of several thousand dollars.

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Have the broker come to you

By visiting your place of business, your mortgage broker will get a better feel for your enterprise and your real estate goals.

I recommend: BizJournals offers helpful advice on dealing with brokers.

Discuss down payment

Commercial loans typically require a down payment of 20 to 25 percent. However, a variety of loan programs allow for loan-to-value ratios of as much as 100 percent.

I recommend: Inland Mortgage Capital is among the mortgage bankers that offer 100 percent loans.

Shop online

Referrals and face-to-face contact are the tried-and-true methods of dealing with a broker, but you can shop for loans on the Internet, too.

I recommend: Visit LendingTree Commercial or iBank to solicit bids.

Understand the wide variety of choices

Commercial mortgages come in as many flavors as home loans.

I recommend: Read Crown Commercial Finance's guide and see Column Financial's list of loan programs.

Get a handle on fees

Brokers are paid by lenders, but they'll often give referral fees to the real estate brokers who steer borrowers to them. Ask your broker to cut you in on the referral fee.

I recommend: Crown Commercial Finance offers this eye-opening overview of referral fees.

Consider an SBA loan

If you run a small business and need to borrow less than $2 million, ask your broker about a Small Business Administration loan. These loans typically require a down payment of 10 percent. SBA lending is its own niche in the commercial mortgage market.

I recommend: Study the SBA's 7(a) and 504 programs.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Prepare to paper your broker with documents. He'll need to see financial statements that establish your history.
• •  Expect to see a prepayment penalty on your loan.
• •  Do your own due diligence: Know current interest rates, don't let your lawyer drag out the legal side of the deal.

Commercial real estate finance for investors is available in various forms. These secured loans are tied to the property itself, making them safer for lenders. Obtaining this type of loan requires proving the creditworthiness of the business owner or the business.

Business real estate lending is the foundation of success for many investors. Few investors purchase property outright in full since this exposes them to a larger risk. Rather, they obtain financing. When considering finance options, consider the following:

1. Note the difference in real estate development financing over property purchase by working with your lender for appropriate financing for your project.

2. Seek out real estate financing from several sources and compare them by cost, availability of funds and the lender's dependability.

3. Surround yourself with real estate finance experts who can help you through the process successfully.

Action Steps
The best contacts and resources to help you get it done

Find commercial development financing help

Real estate developer financing is somewhat different from standard property purchases. The developer may secure financing, not just for the purchase price of the property, but also the development of that property. Short and long-term loans for construction and rehabilitation are available.

I recommend: Obtain land development financing through trusted sources. Contact companies like Wells Fargo to get more information and to find a lender to help with your development project. Grace Capital Group provides an in-depth look at the requirements of obtaining a development loan.

Know the costs of real estate business financing

Prior to contacting lenders, invest some time in learning the costs of investments like this. This includes the cost of interest on the loan and closing costs. Real estate investment loans are less expensive than unsecured loans, but carry the risk of repossession if you default on the loan.

I recommend: Price commercial real estate loans by using online sources. Steelhead Capital provides regular updates of loan terms and interest rates for the industry. Bankrate lists mortgage rates that are comparable to commercial loan rates. Also, use the company to locate estimates on closing costs for commercial loans.

Talk with real estate finance and investment professionals for solid advice

Locating a real estate finance company is important, but knowing the market is also important. Investors should have up-to-date knowledge of the industry, including market trends, properties available and local pricing of properties. Financing is directly related to these trends, especially in the local market. Lenders want to see how profitable the property will be to secure the mortgage on it.

I recommend: Choose real estate finance and investments after gathering full information. Commercial Property Appraisal is an online service offering nationwide pricing and property value information to any investor. REIS provides data analysis on real estate properties, including trends in financing such as current interest rates and property value fluctuations.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Invest in land developer funding through private lenders and commercial lenders. Private loans may help to lessen the demands on collateral and credit history for a new investor.

Real estate finance terms can be confusing. There are many types of loans available, all with different qualifications and situations. The Small Business Administration is one of the best sources of loans for smaller businesses or start-ups. They offer the 7(a) loan program and the SBA 504 loan program. It is also important for business owners to understand how their business credit profile plays a role in their ability to obtain financing for their real estate purchases.

Action Steps
The best contacts and resources to help you get it done

Commercial construction loans

Commercial construction loans help businesses to finance the cost of building a commercial, or income producing, property. These loans may be ideal for apartment building construction, retail development or rental houses.

I recommend: C-Loans provides an overview of commercial construction loans.

7(a) Loan Program

The 7(a) loan program is a guarantee program from the Small Business Administration. This loan enables businesses who have areas of weakness in their application to gain more reassurance for lenders.

I recommend: The Small Business Administration outlines this type of real estate loan in detail.

Mezzanine financing

In some cases, a business may need a unique type of loan. The mezzanine financing option is available for those properties that exceed the traditional 75% loan-to-value limit that most lenders have in place. This type of loan is not available to all borrowers or from all lenders.

I recommend: Steelhead Capital provides more information on mezzanine financing.

SBA 504 loan program

The SBA 504 loan program gives businesses financing for the purchase of land or buildings and for some construction projects. This type of loan is given to those using a certified development company guaranteed by the Small Business Administration.

I recommend: Matsco provides more information about the SBA 504 loan program.

Business credit profile

A business credit profile may become important to a business applying for real estate financing. It is the report developed to show the creditworthiness of a business. It may contain or affect business credit scores or a business' ability to obtain a loan.

I recommend: Dun & Bradstreet provides a description of what a business credit profile includes.

Conduit loans

Some businesses may want to consider conduit loans for real estate purchases. These are helpful on properties such as office buildings, industrial structures and hotels. One of the best features about them is their low interest rates for the lives of the loans.

I recommend: CommercialBanc offers these loans and a description of how they are used.