Investing in commercial real estate can be a tremendously effective way to increase profits and diversify your portfolio. Still, if you don’t have verifiable income, securing conventional funding may be virtually impossible. Fortunately, you may not have to defer your dream of owning commercial property. Stated income loans may allow you to outsmart your peers and complete your purchase sooner than you may think.
What Is a Stated Income Loan?
With a traditional bank loan, you must verify sources of income. This can be difficult for a variety of reasons. The terms of stated income loans, by contrast, generally do not require you to provide verification of cashflow. You also likely don’t have to provide your tax returns, income statements or other detailed documentation to qualify for a stated income loan.
How Can You Use These Loans to Your Advantage?
The advantage of a stated income loan is clear. If you have trouble proving income, you skip the process entirely with this type of financing. There are some other benefits that make these loans ideal for purchasers of commercial property. First, bank processing time is often substantially shorter with a stated income loan than it is with conventional commercial property financing. Even better, most of these loans do not have prepayment penalties. Therefore, you can pay off the loan early to save on interest. For motivated investors, this benefit is impossible to ignore.
What Else Do You Need To Know?
If you make money from a variety of sources, proving your income can be difficult. As mentioned, with a stated income loan, you don’t have to worry about providing detailed information about income streams. Still, these loans are not perfect. In fact, there are some significant disadvantages in securing a stated income loan. Most significantly, these loans often have higher interest rates than their conventional counterparts. Also, you may have to come up with a large down payment to qualify for a stated income loan. Therefore, if you don’t have much cash on hand, you may not meet the minimum down payment requirement.
Buying commercial property is often an effective way to diversify an investment portfolio and distinguish yourself from your peers. Unfortunately, commercial property can be tough to afford. While stated income loans have some drawbacks, they may be right for you. If you want to invest in commercial real estate without jumping through hundreds of hoops, you may want to consider applying for a stated income loan.