Commercial RE - 5 Units Pros and Cons first time buyer?

Question

Hello Bigger Pockets, Some of you may have asked these questions before.

• What are the pros & cons to invest into a commercial property fully occupied for a first time buyer?
• Can I use the house hacking strategy on a commercial property to be approved for an FHA loan at 3.75% interest rates?

Thank you,

Jerry M.

Joel Owens · Answer

Yeah the fixed rate hangout time before the loan comes due tends to dictate the rate among other items. Commercial is nothing like residential. Different Universes.

Now if you have a business and occupy say 50% of a building (strip center) you might can get an SBA loan.

Small balance retail under 1.5 million mainly local banks after that and rates tend to be higher around 5%. Make sure you know the debt you get on a property with cap rate before agreeing to price with a seller. When you get into larger buildings more lenders compete (CMBS, credit unions, national banks, Life Insurance,etc.) and rates can be about 4 and up. Again tons of factors determine rates in commercial. It is a case by case basis for each property and borrower.

Michael Cohen · Answer

Hi @Jerry M. - Unfortunately no, FHA loans are designed for owner-occupied primary residences, defined as 1 to 4 units, so it cannot be used on commercial properties. Also, a 3.75% isn't very likely now (perhaps a year ago, yes) unless you're looking at 15 years, 20% down, and/or adjustable rate loans.

Commercial RE - 5 Units Pros and Cons first time buyer?

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