When it comes to commercial properties, cash flow is the name of the game. The value of commercial properties (multi-units apts. strip malls, office buildings, warehouses, etc.) is derived from the cash that it does, or will, generate. When you purchase a commercial property, you are actually buying an income stream.

If you are financing a commercial property, the Loan To Value that a lender will give you is directly proportional to income. Beyond that, the lender will look for how secure that income is. The rental/occupancy history and leases (particularly for office/retail/industrial) will help them determine that.

For instance, you'll get a much higher loan to value for a retail property with a long-term triple-net lease (ten years or more) occupied by a single-tenant with a very good S&P credit rating, than you will for a partially leased strip mall occupied by several "mom & pop" operations who each have leases of less than 5 years.

Just like residential, you can be creative with financing. However, the flexibility of that creativity will be determined by ---you guessed it---the current or potential cash flow.

The same applies to rehab projects. Obviously the income stream will be reduced or non-existent for the length of the rehab. How will you cover the payments? Lenders will want to know this. You'll have to be able to explain that AND have an exit strategy that makes sense.

There are several ways to be creative and reduce the lender's risk in the deal. Savvy investors/developers will know how to negotiate loans terms based on what they have to work with and seal the deal.

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