Securing an Investment Property Through Inheritance: Options and Strategies
You've inherited a valuable asset—a 6-unit apartment building—that requires repairs and is currently vacant. Given that the property is considered commercial and banks are reluctant to provide financing, you're exploring alternative methods to access the capital you need. In this article, we'll explore various strategies to secure the necessary funds for this investment property.
Understanding the Challenge
The challenge you're facing is common when dealing with inherited commercial properties. Banks often classify such properties as commercial, even if they are paid off, making it difficult to obtain a traditional mortgage. The property's value is approximately $200,000, and you currently have $100,000 as your savings. However, this sum is insufficient to cover both the repair costs and the remaining capital needed for investment.
Maximizing Your Options
Despite the challenges, there are several paths you can take to secure the capital you need:
Seek Legal and Financial Guidance
The first step is to consult with a lawyer and a financial planner. They can offer valuable insights specific to your situation and jurisdiction. A lawyer can advise on the legal ramifications and potential loopholes, while a financial planner can provide guidance on financial strategies and long-term planning.
Explore Alternative Financing Options
Banks are not the only source of financing. Consider the following alternatives:
Mortgage Brokers: A mortgage broker can help you find specialized lenders who are willing to work with commercial properties. They can also assist in tailoring a financing package that fits your specific needs. Personal Lines of Credit: A line of credit secured by the property can provide the needed funds. This option allows you to access the money as needed, and you can pay off the debt in installments. Private Investors or crowdfunding: You can explore the possibility of finding private investors who are interested in commercial real estate. Online platforms can facilitate this process. Additionally, crowdfunding has become a popular method to raise capital for real estate projects.Marketing and Selling the Property
If traditional financing options are not feasible, you could consider marketing the property and finding a buyer who is willing to take on the investment. This can be a viable option, especially if you are not committed to keeping the property for a long-term investment. Engage a commercial real estate broker to help you sell the property and ensure it attracts the right buyers.
Enhancing Your Credibility
Banks and other lenders typically require a track record of successful property management. If you're not currently managing the property, consider taking steps to demonstrate your knowledge and capability. You could:
Attend financial courses at a local university or online to improve your understanding of real estate management. Volunteer or take on small management roles to gain experience. Network with other property managers and investors to build credibility.Securing the Property for Repairs
If you decide to finance the repairs, make sure to use the funds efficiently. Prioritize major repairs that will enhance the property's value. Here are some steps to consider:
Conduct a thorough inspection to identify all necessary repairs. Develop a detailed budget and timeline for the competitive bids from contractors and suppliers. Use the line of credit to cover costs incrementally, as repairs are completed.Conclusion
Securing funds for an investment property can be challenging, especially when dealing with inherited commercial properties. However, with the right strategies and guidance, you can find a way to finance the necessary repairs and manage the property effectively. Whether through alternative financing methods, partnership with a broker, or enhancing your own expertise, there are always viable solutions.