Personal v. Commercial Loans

[Jack Rozema]

When looking to finance your purchase of an investment property (I'm thinking of smaller properties like single family homes or duplexes), is it better to use a personal/conventional loan or try to get a commercial real estate loan? What are the disadvantages/advantages of each? Do you need to have an LLC set up to get a commercial loan?

Just a broad overview/comparison would be nice. Some additional places/contacts to learn more about this would be greatly appreciated!

[Stephanie P.]

Originally posted by @Jack Rozema:

When looking to finance your purchase of an investment property (I'm thinking of smaller properties like single family homes or duplexes), is it better to use a personal/conventional loan or try to get a commercial real estate loan? What are the disadvantages/advantages of each? Do you need to have an LLC set up to get a commercial loan?

Just a broad overview/comparison would be nice. Some additional places/contacts to learn more about this would be greatly appreciated!

The ease of use is certainly on the commercial/non-qm side for single family properties.  Conventional is cheaper, but a lot more difficult to get qualified.  We always recommend going through the pain of conventional first and then coming to the commercial side.  That way the borrower has expended their ability to get conventional financing (and they get cheap money), they expended the effort needed to get the cheap money and when they can't get it anymore or don't want to go through the hassle (pay stubs, tax returns, K1's, business tax returns etc...), they have a higher appreciation for the low hassle approach to commercial lending (even though it costs more).

Hope that helps

Stephanie