Availability of commercial financing

4 Replies

Hey there BP peoples! Can I get commercial financing for the purchase of MF properties if I have plenty of assets, great credit, but no income? Any advice would be greatly appreciated.

I have found that for the smaller commercial stuff I have been doing (under 1 million) they still care about income. In fact, my partner and I closed on a 20 unit in South Bend, IN last year as well as a 9 unit in Berwyn, IL. During the Berwyn transaction, they gave us some issues about our personal income. 

I have heard that lenders don't look at income on the larger properties, but I have not gotten there myself as of yet!

@Patrick Thorp Good question, I’ll be interested in the answer. It might depend on if your assets generate income for you. That might help with the DSCR. Having $2M in diamonds isn’t the same as having $2M in mutual funds which isn’t the same as $2M in income producing real estate. It’s a hyperbolic example but hopefully it makes sense. At the minimum, I’d search and download a template for a personal financial statement (PFS) and have that ready. At least then you’ll have an easy way to describe and quantify “plenty of assets” for a prospective lender.

But I’m no lender. I just remember what I went through on the commercial loan process.

Thanks for the advice fellas! most of the assets I'd be leveraging are liquid, stocks and cash. I'll probably stick with financing above $1 million and go the commercial route. Hopefully this will help the cause. Thanks!

From a financing perspective, you don't technically have to have an outside source of income. More important is whether you have other sources of income or assets to maintain your personal and/or other obligations. In underwriting of commercial projects, the underwriters will primarily be concerned with the subject property but will want to see the strength of the sponsors. If you have a ton of personal or other debt, that may impact the underwriting since it may be determined you will need to make excess draws from the subject commercial project to satisfy your other obligations.

Underwriting is not an exact science but to answer your initial question, no, you don't necessarily have to have an outside source of income.