For those of you that have completed a few commercial deals, could you help me setup a step outlined procedure from beginning to end of how a comercial deal comes together? Right now I have called on a few properties and am ready to submit an offer, but am confused about the steps I need to take after this; like when does financing come in to play, etc. Thanks, Mike

Howdy Mike:

There are several things that you need to do to get the financing arranged. I first talked to my lender and they said I need an appraisal and a list of repairs to be done and an environmental engineers report and a structural report. I ordered the appraisal first because I was pretty sure my numbers were right but I wanted to make sure. At the same time I was gathering bids on the repairs. The appraisal came in $100K higher than I first thought but the repairs were about $100K more too. The environmental report cost $2500 and the structural report was $1200 and the appraisal was $1600, all of which was at risk once I ordered them. Not very many surprises to me but the lender wanted another $20K added to the repair estimates to cover some of the items and wanted to add some more paved parking at the rear of the building.

Of course I got a copy of the title report from the title company before ordering anything. I did start getting bids before the report.

Your deals may be easier as this was a 30,000 foot warehouse that had been mostly vacant for 15 plus years. I paid $165K for the building and will spend $220K on the repairs.

Ted, I have no money to put into a deal. No money for a down payment and none for the appraisals, title, etc. Where would I get the money for the appraisal if it cost thousands of dollars? Can it be wrapped into the loan somehow? Mike

Howdy Mike:

It can not be wrapped into the loan. The lender does not want to risk the money on your deal. I have used my own money or part of it or borrowed it from investors for 36% interest. I have a coin collection as collaterar for one loan of $22,000 and a baseball card collection up for another $5000 plus second liens on several properties for other loans. The money is expensive but necessary. You could also look for partners which are more expensive but less risky as they are taking part of the risk if not all the upfront risk if they supply all the funds.

Hi Dynomac,

generally, lenders like to see at least 5% of the buyers capital infused into the deal even if there is some seller concession, however, you will find it almost impossible to get a loan without having at least the appraisal money.

There is, however, a couple of possiblities.

If you have a fico above 680 and have been in business for the past 3 years and have at 5 - 10k in the bank to show as reserves (even if you don’t use them) then we usually do an unsecured line of credit for the appraisal and down payment money and then do the rest of the loan as a conventional loan.

If you fit that critera it may be doable.
The only concern I have is that if you are running so close to the bone and have so litle discretionary cash, you may not be ready yet to make the deal, unless there is enough money left over from the ULOC to keep for things like emergencies and repairs and things that typically come up.

Another possibility is cross collaterlizing another property (like your home etc.) if it has sufficient equity.

The third choice would be to do a cash out refi or a heloc on your home to come up with the dp and appraisal.

Hope this helps.

If I can answer any of your questions please feel free to ask me here or to email me,

Good luck,



Do you find in purchasing an apartment complex that it is necessary to do a structural and engineer appraisal?

If I’am purchasing a $260,000 apartment building, what amount of closing cost can I expect to pay and please list what they are? Thank you!



When purchasing an apartment complex, common practice is fo rthe lender to order a full appraisal on the property.
Commercial appraisals start at $1,500 and go up from there. It depends on how many units there are.
Other considerations are environmental issues if you are near a gas station or other similar issue.
Appraisals are always paid up front.

The closing costs will vary depending upon a number of factors.
Also understand that there is a difference between closing costs and setlement costs. Settlement costs will always be higher because they take into account things like title insurance, recording fees, escrows, etc.

1- how many points are on the front of the loan
2- The LTV of the property will effect the down payment.
3- Your credit score will also effect the acceptable LTV and down payment collaterally.

On such a small loan, there shouldn’t be that many fees and the appraisal should not be that costly as I would suspect that there are not that many units. I am assuming by the cost that there are 5 or 6 units involved.
If it is a straight deal with good FICO and good DSCR closing costs could be between 7k - 10k. Front end points would cause a higher or lower closing cost.

Just keep in nmind that no matter what anyone says, lenders get their points and fees either with pointws on the front or a higher interest rate.
So you can determine what is more important, a lower closing cost witha slightly higher interest rate or higher closing costs with a lower rate.

Hope this gives you some insight.


I wanted to do the same thing to start off as well, start with a larger building that would bring in more money. Sadly I found that most investors don’t want to talk to you about a commerical loan unless you have money to put down, period.


Hi Rich,

You are correct in your statement “MOST Investors do not want to deal with you without a downpayment”, but that does not mean ALL.

ALso, just a slight change in terminology…
Invest INVEST money with you and become a partner with you. A LENDER lends money to you and to investors.

We do 100% loans all the time.
Especially when the property is an apartment building with 20 or more units and is under $2 Million.

Other 100% deals can be accomplished as well with combination of unsecured funding for the down paymnet and conventional commercial loan for the balance.

The firs is a straight forward 80/20 combo loans, similar to an 80/20 residential deal.

The second is a different animal.
It is a 2 stage loan.
Stage 1 - Unsecured loan. For this we need 680 FICO and 3 years owning a business and at least 10k in bank for previous 4 months.
Stage 2, upon funding of stage 1, the funds are used as downpaymnet and often closing costs as well.


I have looked into this type of investing ; apartment buildings; but because these commercial buildings ara what they are I find it impossible to find one that a 100% loan would allow for profit .All sellers of theese types of structures seem to be selling at market value which covers their mtg but not the new owners ; me ; who is pay 10 times what they paid 20 years ago . any comments welcome 8)


You said at least $10,000 in the bank for the previous 4 months.
Does it matter if it is in your personal account or the business account?

Thank You


It can be either business or personal.


can we order our own appraisal or the bank will send its own people ?

Hi Love to know,

Unsecured loans do not require appraisals.
Most other types do and in those instances, Lenders like to select the appraiser.


here goes a dummy question: what is unsecured loan ?

Hi Lovetoknow

an Unsecured loan is just what it says. It is a loan that is not secured by property or equity.
It is more or less a signature loan.
If your credit score is high enough and other factors qualify you, then a bank or lender will lend you usually up to 50k - 100k without requiring you to own, or cross collateralize or hold up any property against repayment.