Long-term passive income can be created by investing in retail real estate or shopping centers. The price of purchasing such a property can be prohibitive, though. Thankfully, you can finance your investment in a retail property or shopping center in a variety of inventive ways. In this article, we’ll look at some of the top financing options for retail real estate investments.

Home Equity Loan

The most typical method for financing a retail real estate investment is a conventional mortgage. To purchase the property in this scenario, you borrow money from a bank or lender. If you are unable to repay the loan, the bank or lender has the right to seize the property because it is secured by the loan. A 10% to 20% down payment of the property’s purchase price is typically required for this kind of financing.

Loan under SBA 7(a)

If a small business wants to purchase a retail property, a Small Business Administration (SBA) 7(a) loan is a fantastic financing choice. The government will cover a portion of the loan if you can’t make your payments on this kind of loan because it is guaranteed by the SBA. This program has a $5 million borrowing cap, and the interest rates are typically lower than those of conventional mortgages.

Vendor Financing

In a situation where there is seller financing, the retailer of the retail property provides the funding for the acquisition. This can be a fantastic option for buyers who do not qualify for conventional financing or who wish to avoid the costs and conditions associated with a conventional mortgage. In this instance, the seller takes on the role of the bank, and the buyer gradually makes payments to the seller.

Cash Advance

A short-term loan backed by the value of the property is known as a hard money loan. Investors who need to renovate or sell a retail property quickly frequently use this type of financing. Although hard money loans have higher interest rates and shorter terms than conventional mortgages, they can be a good option if you need money right away.

Financial Assistance

Similar to a hard money loan, a private money loan is financed by a single or a small group of private investors. Even though private money loans frequently have interest rates that are higher than those on traditional mortgages, they can be a wise choice if you have a strong business plan and a high likelihood of a positive return on investment.

Crowdfunding

In recent years, investing in retail real estate has become increasingly common using crowdfunding. In this case, an online platform is used by a sizable number of investors to make financial contributions to a project. The profits or rental income from the property is usually distributed to the investors as a percentage. For investors with limited resources who want to invest in real estate, crowdfunding can be a good option.

REITs

One type of business that owns and manages real estate is called a real estate investment trust (REIT). The REIT is an entity that allows investors to purchase shares, with the proceeds going toward buying and managing real estate. If you want to invest in real estate but don’t want to manage the properties yourself, REITs are a good choice.

Lease-Option

In a lease-option contract, the buyer leases the property for a set period of time and then has the option to buy it once the lease term is up. In most cases, a larger portion of the purchase price is included in the buyer’s higher monthly payment. Buyers who want to inspect the property before making a decision about buying it may find this type of financing to be a good choice.

House Equity Loan

To finance your investment in retail real estate, if you own a home, you can get a home equity loan. The interest rates on this type of secured loan are typically lower than those on conventional mortgages because your home serves as collateral. Your home could be lost, though, if you are unable to repay the loan. For investors who have a lot of equity in their homes and want to benefit from the lower interest rates, this type of financing can be a good choice.

You can invest in retail real estate or a shopping center in a variety of inventive ways. There are benefits and drawbacks to each type of financing, so you should pick the one that best suits your financial situation and investment objectives. Before making a significant investment, it’s always a good idea to speak with a financial advisor or real estate specialist to make sure you’re making the best choices for your financial future.

F2H Capital Group is a debt advisory firm specializing in negotiating the best terms for your commercial real estate projects. The company offers a range of financial products and services, including fixed loans, bridge loans, and construction loans across all asset types. Please contact us for any of your financing needs.