Newbie looking to pickup my first multi unit (13 unit) property.
I’m told by local lender that these commercial loans are pretty “standard”, and that they do not have much flexibility.
He said anywhere I go I will be looking at 2 points, 4K appraisal and fees, and a rate between 6 and 7 percent. He also said they only do 5 year terms.
Can anyone confirm this? What types of commercial loans are you seeing for multi unit properties?
I have great credit and can put 30% down.
Thanks
Hi,
Once you get into the commercial property game, the loan is made based on the property and the buyer or group is assessed for responsibility (credit) longevity at job or career (employment) and experience with commercial property (track record).
Anything above 5 units is considered commercial multi-family property. Interest rates, points, terms and conditions, balloon, appraisal fee (like structure) and down payment / previous owner carry requirements are all basically the same.
Having great credit means a lot less in commercial lending than for a residential mortgage, the loan is calculated based on lender risk and the approval is based on the property finances (Income & Expense).
25 to 30% down is pretty standard in commercial properties with the preface that a lot of lenders will allow some percentage to be carried by previous owner, normally a 10 to 15% owner carry second is ok with most lenders with buyer putting up at least 10 to 15% in cash.
You will notice if you close this property that the loan does not show up on your personal credit report, that is the difference between commercial and residential lending requirements.
Good luck,
GR