Commercial Financing Requirements

[Cyril J Strezo]

Hi Group,

I am currently looking to buy a rental property. I'm looking at multi units in the 2-4 range and also units in the commercial range with 5 to 6 units. I recently reached out to someone about a commercial property with the intent of putting down 20%. They had two roadblocks, one was they needed 25% and that is just a bit out of my budget but also they said they can't do loans under 500K. Is there anyway around the 25% needed with commercial lenders. Also if it is under 500K is there companies that will finance something in the commercial space under that amount. 

Thanks and any help or information is appreciated. 

[Erik Estrada]

Quote from @Cyril J Strezo:

Hi Group,

I am currently looking to buy a rental property. I'm looking at multi units in the 2-4 range and also units in the commercial range with 5 to 6 units. I recently reached out to someone about a commercial property with the intent of putting down 20%. They had two roadblocks, one was they needed 25% and that is just a bit out of my budget but also they said they can't do loans under 500K. Is there anyway around the 25% needed with commercial lenders. Also if it is under 500K is there companies that will finance something in the commercial space under that amount. 

Thanks and any help or information is appreciated. 

 The only other way around it is getting the seller to take on a second position. You still need to come in with at minimum of 10% down. The lender will only finance 70% of the purchase price. 

Commercial loans vary from lender to lender, but typically most lenders want to see a DSCR minimum of 1.25 and 12 months of rental history. Lenders will also request the property expense and income summary along with the rent roll.

Experience is a key factor for the best loan terms along with FICO, DSCR and LTV. I highly suggest getting a few 2-4 units under your belt and then getting a 5+ Unit.

Some lenders require a minimum loan amount of $500k while others require a $250k loan amount minimum. It varies from lender to lender.