Can You Buy Commercial Real Estate With SBA Loans?

Real estate investment has never been as competitive as in today’s market, and that means finding the right financing is also more important than ever. When you have stiff competition for inventory and customers, the cost of capital plays a much bigger role in your profit margin than it does when you are in a market where fewer other investors influence your price lines because the competition pushes bids for properties up while increasing the retail real estate available locally. That means you need to get creative, including rethinking products like SBA loans that are usually aimed at businesses that need headquarters and not property investors.

SBA Loan Limitations

If you use loans from the SBA to buy property, then you need to use the majority of the property for your business. That means they aren’t useful for flipping or income properties under most circumstances, but there are specific cases where they are your best bet. One example is when you can buy the property with multiple storefronts. If you put your office in a large enough slice of the space to satisfy the SBA, you can still get tenants into the rest to cover the cost of the property and more.

Another option is to set up a company that is essentially another way to monetize your property investment. Hotels and motels are a great option, and so are trailer parks and campgrounds. The key is to have a monetization strategy that allows you to pursue the exit plan of your choice after the loan is paid off.

SBA Loans for Your Company’s Headquarters

As you grow your operation, you will need a base of operations to call your own. This is especially true if you are building your own real estate sales team to remarket your properties. In those cases, an SBA loan to purchase the office space you need can be your lowest cost path to the capital, since interest rates are tightly controlled and loan terms are generously long. That keeps your overhead low and makes it easier for you to keep capital free for deals.

There are plenty of reasons why professional real estate investors should take a closer look at SBA loans, but they are not a replacement for your core acquisition strategy. They are, however, very useful for getting yourself into a situation where you are covering the cost of your commercial mortgage with income from tenants, if you plan correctly.