Adaptive Re-Use: How to Succeed in Getting a CRE Loan When Giving Old Buildings New Life
Adaptive re-use properties have proved to be more than just a trend. Businesses and residential tenants are finding functionality and aesthetic appear in adaptive re-use properties, and commercial real estate investors are finding them highly profitable. However, before seeking financing for an adaptive re-use property, there are a few things investors should prepare for before meeting with a lender.
Building a Strong Case For Adaptive Re-Use Properties
Most traditional lenders might think that purchasing a run-down warehouse or abandoned school is a high risk venture. If you have the vision for adaptive re-use, take the time to prepare a strong case to your lender. The first step is to research the history of the property. Find out its former purpose, and how that can be incorporated in its new incarnation.
Demand is Key
There has to be a demand for the type of property the old structure will become, at the end of the day. Turning an old brick schoolhouse into a niche grocery market may have a demand in some places, but not in an area where it would be surrounded by other grocers. However, an old textile mill converted to high end apartments or an old warehouse turned into a brewery or restaurant will have tenants and buyers. Before applying for financing, build a strong case to show the demand for the property’s purpose after renovations.
Location Trumps All
Location is still the tried and true axiom, even with adaptive re-use properties. While people may be clamoring for the appeal of that factory converted to apartments or that church turned into a club venue, the surrounding area will play a big part in not only the demand, but the return on investment. The building may have all the aesthetic appeal and charm, but if it is right next to a highway or train tracks, it may not attract many buyers or tenants.
Always Consider the Community
Commercial real estate investors breathe new life into old buildings and improve communities. In the case of adaptive re-use properties, it helps to appeal to the sense of community when seeking financing. People in the immediate area may have fond memories of certain properties and want them revitalized. Additionally, it helps to check city and state programs for grants and tax credit designed for rehabilitating and restoring older structures for a modern purpose.
Find the Right Financing
While traditional lending institutions may not be too keen on adaptive re-use projects, there are a number of other options available. At CounselPro Lending, we offer commercial real estate financing solutions for adaptive re-use properties of all shapes and sizes. Contact our offices today to learn more.