Financial Commercial Real Estate
April 30th, 2008
Once you determine the town/ are you want to buy commercial real estate in, and then your next step is to find a commercial building you feel that is ideal. After you’ve done that and you want to make an offer on that commercial property, and the seller accepts. Get excited, your day went just the way you wanted it to go, and you have already been pre-qualified for the commercial property you want to purchase. Rewind, back up, this is a perfectly realistic example, but before you begin your search for commercial real estate, it serves to your advantage to have an idea of some of the requirements when purchasing real estate.
- Commercial Real Estate is Not Residential Real Estate
What this means is your credit score is not the main picture here. In purchasing residential real estate you want your credit to be as high as it can be, because your credit determines your interest rate, your monthly mortgage payment, and the amount of money you put down. In commercial real estate, lenders are not worried about your credit. They are more worried about your financial credentials in the respect of how much money you can put down. This leads to our next tip.
- Banks Will Usually not Finance More Than %75 of the Appraised Value of the Property
Regardless of credit score, that is the general rule that lenders follow. Does this mean you have to come in with the %25? Not necessarily. A portion of it can come from you and the other portion can be done through seller financing (visit for more information on seller financing). For instance, let’s say the bank approved you %75 of the appraised value, and you can put down %15. The bank will not have a problem if the seller is willing finance the %10. If the seller is willing to finance the entire %25, then you may have a deal. But I must point out that deals like that are rare.
- The Commercial Property Must Show Sufficient Debt-Repayment Ability
What lenders like to see is the ability that %75 of your gross income from your commercial property can pay the mortgage of your loan (Principle, Interest, Taxes, and Insurance). This information is determined by appraisers or you can ask the seller of the commercial property you wish to purchase.
Conclusion
I can go into lending guidelines and finance programs for commercial real estate, but that will be too lengthy and boring. For more information on commercial real estate you can e-mail us at or you can visit for some articles regarding commercial real estate. Realtors are definitely a good source of information regarding commercial real estate. We look forward to any questions and comments you may have. Thank you
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