Lease or rental payments do not build equity. Neither do they provide much in terms of reducing taxes. Compared to mortgage payments which are a fixed expense, for a longer period that do not increase at the whelm of the lender. Consider what happened to many entrepreneurs during the pandemic, when landlords arbitrarily increased leasing rates largely because of the economic environment and greed.
Equal access to capital has always been the barrier to entry in commercial real estate. If we are to overcome the predicted recession, we need to ensure that our businesses have access to capital.
If you are a business owner, currently leasing space from a landlord an asset-based lender (aka, Private Money Lender, or Hard Money Lender) provides the capital needed to get a deal done. Obviously, you must have some skin (capital) in the deal, but you won’t have to be concerned about the rigid underwriting process of the banks or your credit score being a factor.
Structuring a deal in this fashion has many advantages. An all-cash offer to purchase real estate will almost always get you the deal. Cash is king and generally will get you a discounted price, also.
A private money lender is only interested in the value of the building, which will be used as collateral for the loan. Naturally, the operating revenue generated by your business, must be sufficient to make the interest only payments, until you can refinance the property for a lower interest rate with a bank.
(Part 2 of 3)
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