What is a commercial investment loan?
- For commercial investment loans, the borrower does not occupy the property but instead purchases and uses the property (or properties) as an investment vehicle to generate income (“non-owner-occupied”).
- There are four main types of income-producing real estate: (1) offices; (2) retail; (3) industrial; and (4) multifamily (5 units or more).
- Other less common types include mixed use, hotels, self-storage, parking lots and senior care facilities.
Success Stories (Commercial Investment Loans)
Sample commercial investment loan programs
We have access to loan programs for virtually every type of investment property. We highlight just a few below:
Multifamily: If you intend to invest in multifamily properties (5 units or more) as a source of rental income, here are typical loan terms:
- Loan amount: $250,000 to $50 million (depending on number of units, which can range from 5 to 200+ units)
- Debt-service coverage ratio (DSCR) or debt-coverage ratio (DCR): Usually, lenders like to see a DSCR of at least 1.15 (meaning the company must generate enough cash flow to cover its operating expenses plus an additional 15% more to cover its debt payments)
- LTV/LTC: Up to 75% loan-to-value ratio of stabilized value, and up to 80% loan-to-cost ratio
Small-balance loans ($200,00 to $2.5 million) for variety of investment properties:
- Eligible property types: office, warehouse, light industrial, retail, bars, restaurants, automotive, self-storage, day care centers, mobile home parks
- LTV: Up to 80%
- Loan terms: Up to 30 years amortization, fixed for 3, 5, or 7 years
Blanket mortgages: These loans cover or “blanket” multiple properties and are ideal for (1) developers who plan to purchase and develop land to subdivide into individual lots; (2) fix and flippers who plan to renovate and resell multiple houses; and (3) investors in several multifamily properties. Blanket mortgages allow the borrower to negotiate more favorable interest rates and avoid paying costs on multiple mortgages.
Creative ways to qualify: Instead of requiring traditional documents such as tax returns, some lenders may be willing to qualify borrowers based on rental surveys (which are appraisals of typical rental streams in the same geographic area). Other lenders are even willing to forgo DSCR requirements, and instead will conduct an appraisal to assess the value of the property.
The parameters listed above vary from lender to lender. To learn more about commercial investment loan terms, call David A. Krebs at 321-239-2781, click here to submit a message, or click here to book a call.
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