Financing Commercial Real Estate:
We break Commercial Real Estate Loans into two broad categories:
Investment commercial real estate.
Owner-Occupied Investment Real Estate.
Commercial Real Estate Investment Property is when the user of the real estate is not related to the tenant or end user of the subject real estate. Below are examples of commercial real estate investment properties:
- Apartment loans, Multifamily complexes. These usually start at 5-units up and are leased to residential users typically on year leases. Loans as low as $500,000 are available with non-recourse loans available over $1 million.
- Rental houses from single family dwellings to four units can also be investment properties, so long as the owner does not reside in any of the properties. We have loans for portfolios of this property type starting at $2 million.
- Retail properties fall into several sub-categories:
- Unanchored and Anchored Shopping Centers or also called strip centers. Loans for these start at $500,000
- Regional Malls with at least two major department store tenants among dozens of smaller tenants. Loans for this property type start at $7.5 Million.
- Single tenant properties such as, Auto Zone, QuikTrip, Walgreen’s, McDonalds Restaurant. Loans for these start at $750,000.00.
- Industrial properties are also known as light industrial buildings, flex office warehouse, or just warehouses. The best loans for this property type start at $1 million.
- Self-Storage, also known as mini-storage, cold storage, and climate-controlled storage can be classified at investment property and as owner-occupied. For investment property the best loan products start at $2 million. Owner-Occupied loans are available from $750,000 to $5 million.
- Office Buildings: These can be single tenant to multi-tenanted properties ranging from a class “C” to class “A.” You generally find these buildings in larger metropolitan areas in the central business district or suburbs. The best loans for this property type start at $1 million.
Owner-Occupied Real Estate is when the user occupies and/or operates the business that is utilizing the subject real estate.
- Office Buildings, Retail properties, self-storage, nursing facilities, hotels and more can all be classified as owner-occupied properties. Loans from$500,000 and up are available through these offices with as little as 10% cash down. Long term fixed rates are available. The focus with be first on this historic performance of the operating business, second importance on the pro forma, unless a start up then the pro forma will be used.
Loan to Value Ratios:
Investment property ranges between 65% and 83%.
- Apartments range from 83% with FHA/HUD (new construction up to 90%), with 80% loan to value readily available for qualified investors with interest only available as well as 30-year amortization schedules. FHA/HUD 35-year term and amortization schedules for existing properties, 40-year term and amortization for ground up construction.
- Office, Shopping Centers, Industrial loan to values range from 65% to 75% with amortizations to 30-years for loans over $3 million.
- Single tenant CTL loans most lenders prefer to amortize the loan over the remaining lease term (ignoring lease extension options). Some lenders will consider a small balloon balance at the end of the remaining lease term not to exceed the unimproved land value or 7-years beyond the remaining lease term.
The Commercial Real Estate Investor has many options:
- Equity is available for Multifamily starting with a minimum equity injection of $1 million.
- CTL loans available not to exceed the value of the collateral.
- Mezzanine funds are available to bridge the gap between the senior first mortgage lender and the required down payment. The mezzanine lender can bridge the gap from the 65% level up to 75% (up to 80% for apartments).
- Commercial Bridge lenders can step in a provide non-recourse funds that allow the investor time and the required funds to renovate or otherwise reposition the subject real estate. The loan to value can vary from 80% of costs and 75% to the as completed value (5% higher for apartment loans).
- Hard Money funds generally do take on higher risks in the under lying collateral as Bridge Lenders. This lender type will look past historic credit issues and other loan defaults if they are comfortable with the underlying collateral.
The good news there are many sources of funds available to the real estate investor to find the right commercial real estate financing solution. Caffrey & Company LLC are experts in bringing the best financing solutions to you the investor.
On our web site you can read about specific loan products: www.caffreyloans.com/loan-products, offered by Freddie Mac, Fannie Mae, HUD/FHA, Commercial Mortgage Back Securities (CMBS) and other loan products. Want more details on sample interest rates for apartment check out Interest Rates for Apartment Loans also on our web site: www.caffreyloans.com/apartment-loans.