Longmont, CO · Member since 2013 · 5 posts · 5 votes
My wife and I were looking at some homes in Denver and we inquired about purchasing a model. The builder said they did a leaseback for 12-36 months but they required cash or commercial loan for the purchase. Has anyone done this before using a commercial loan? I currently own 1 rental and another primary home with a credit score above 750 but I was wondering if it is harder to qualify for a commercial and if the terms are a lot different. The leaseback may be a good deal but I'm not familiar with the commercial loan side. If anyone here has any advice/insight that would be great.
Realtor · Denver, CO · Member since 2016 · 499 posts · 129 votes
8y
Hi Chris, I have not done this before but usually the commercial loan will have a higher interest rate. With the right lender sometimes qualifiaction is easier than residential and is more focused on the property itself and not the borrower and usually they will want at least the 25% down.
Let me know if you need a good lender who does commercial loans.
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
8y
@Chris Yenter sounds like you want to buy the model but the builder is not done using it so the plan would be for you to purchase it and then they lease it from you until they are done selling homes. When they are done they, turn it back over to you and you move in or rent it out. The builder is right. Since the home won't be a residential property until they are done you would need a commercial loan since you would be leasing it to a business for office space. You could probably find a bank that would do a "bridge loan" of some sorts. There are a number of risks for you. If interest rates jump a good bit you might not be able to get financing to get out of the commercial loan when the builder is done. The interest on bridge loans are higher. They have shorter terms as well. They might offer interest only terms and require a balloon payment. If the builder drags out the completion of the project then your bridge loan might be due before you can get conventional financing. On the plus side, you get the appreciation on the property while they finish the build-out.