Pricing and Costs of Real Estate Finance

Real estate financing costs for investors and developers

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.

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.

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.

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).
  • 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.

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