Commercial property financing helps investors leverage their own capital to acquire more investment property or to increase property cash flow. With a business plan in place some commercial lenders lend on the future value of your property so that you have more capital to purchase and renovate the property. The best capital strategies are tailored to each property and investor.

Commercial real estate loans are underwritten to reflect the income, expenses, and operating history of the property for conventional financing. An investor does not qualify based on their personal income, but on the income and operating of the commercial property. This is the main difference between commercial real estate loans and residential loans. A typical down payment for a purchase is 30-50% of the purchase price although there are some banks and commercial private lenders that will require a less down payment and allow for more leverage (loan to value ratio). A commercial property where the investor will also occupy the majority of the the property for their business most often seen with industrial or retail property may qualify for an SBA loan program.

Multifamily 5+ Units

Commercial Financing for multifamily properties are based on the current income and expenses of the property and how it operates. Typically commercial banks will require a down payment of 30-50% dependent on cash flow. Most commercial lenders require a debt-coverage-ratio (DCR) of between 1.20-1.25 although recently some banks have increased their DCR and reserves requirements.