Welcome to third and final segment of a three-part series about income property. In this segment we will be discussing financing options for industrial income properties as well as upside (and downside) of owning this type of property.
Of three types of income property, industrial property requires greatest degree of technical expertise and experience. Likewise, financing acquisition of an industrial income property can be, at best, very risky without adequate planning and know-how.
The first thing to consider is what kind of industrial application building will be used for. Not all lenders will fund purchase of all types of industrial income property types. For example, funding purchase of industrial real estate to be used for petroleum refining is a risky investment for many lenders. Make sure your lender is able to support your income property goals.
LTV rates for most industrial income property loans run at a maximum of 75%, so plan on having a nice pile of investment capital on hand. Industrial loan interest rates can also be a little higher than for other income property types-usually between 5.6% and 7.5%. The 20-year term that comes with most industrial income property loans is fairly typical.
Because of nature of manufacturing facilities, liability becomes much more important than in residential or commercial income properties. Securing proper type and amount of insurance can help mitigate much of risk you will take on after you lease your industrial facility.