Commercial loans and their requirements

10 Replies

How does the commercial loan process work? What's required to obtain a commercial loan for apartment complexes? example down payment size!!

Depends on the number of units.

10,20,30 units likely local bank. Larger properties you go into commercial lenders. They both underwrite borrower a little differently.

Revers question would be how much capital (cash) do you have to invest today??

Typical down is 25% with some instances of lender allowing a seller carryback of 10% for putting 15% down. 

Yes. That went out on the downturn back in 2009,2010 for the most part. Too much money ready to buy properties today for sellers to go for that type of stuff.

Even if they will do owner finance most will still want some money down and you need money for closing costs and reserves.

Are you trying to get owner finance and have money to put down??

If you are thinking no money down deals those are pretty much non-existent today. I wouldn't bet your business model on that especially if you have no experience or properties to put up as cross collateral.  

Still seeing some owner financing, but they usually want a lot higher interest rates.  On smaller product you would look at a bank between 4 and 4.5%, and the owners i've seen would be a couple points higher on the rate.

Most of the bank terms today on anything over 4 units would be like 25% down, Prime +1.25-1.5%, 20 year amortization.  Oh - and they'll need a personal guarantee on anything these days too.

@Jeff Plair  

Jeff, I had the same inquiry about 75 days ago & here I am now..closed on a commercial loan / apt buildings.

Check out my profile, the thread "commercial financing" was my journey through the WHOLE process. Let me know what you think. A lot have found it to be informative and interesting.

Talk soon! 

@Joel Owens no, I know they won't without a good downpayment!! I did a post earlier about purchasing multiple houses but I have come to see that the multi unit apartment complex is would be better than individual houses

@Nik S. I'm going to look for that, thanks. Please feel free to give extra advise also, I'm always open to learn!

@Jeff Plair  

Not a problem at all! But check out the whole thread & then feel free to ask away! I'm not an expert but everyday I am learning more and more. I'm sure we can learn together!

I just took ownership of my lastest aquistion on the 11th of this month.

It helps to have a relationship with a local banker you can talk to who actually makes the decision.  I just got approved for a construction loan to build 14 new units on to our existing 11 units.  It would have been a nightmare with Bank of America, who I used to be with.  Local bank was much better where I could sit down with the decision makers.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.