Beverly, MA · Member since 2016 · 25 posts · 4 votes
I'm trying to run the numbers on a commercial using the bigger pockets calculator... the issue that I'm running into is that the "number of years" section. If the loan is going to change in 5 years do I put in 5 years or 30 years?
Specialist · Carolina Beach, NC · Member since 2016 · 390 posts · 496 votes
7y
With a commercial loan, there are two key factors to consider, the Amortization and the Term. Most residential loans have the same amortization schedule and term, 30 years. Commercial loans can very widely, but a typical loan will be something like a 25 year amortization and a 5 year term, meaning the loan payments are spread out as if the loan will be repaid in 25 years but there is a balloon payment at 5 years. The balance of the loan must be repaid or refinanced in 5 years.
To my knowledge, the Bigger Pockets rental analyzers do not include a loan term as they mostly deal in residential properties. I would just input the 30 year amortization and ignore the term for now. That will give you the basic numbers.
However, remember, the loan is going to be due when the term is up so your exit strategy had better factor that in.
Investor · Stratford, CT · Member since 2015 · 258 posts · 230 votes
7y
you would put in the amortization period, not the term so the calculator can give you the correct monthly payment. So, if you got a loan with a 5 year term and a 25 year amortization, you would use 25. Just be aware that your debt service will most likely change n year 6.