Commercial Real Estate Finance

Question by steve f: Commercial real estate buying and finance compared to residential?
To be in a position to purchase a free standing small office building, downtown, eastside, heart of lasolas, riverfront… all of it…At a time folowing the sub prime collapse, and bolstered furtther with a built in tenant, in my own business… and lastly being positioned such that no need to sell in this market dip is necessary to accomodate a buy. As my header suggests, the question or wonder is about the lines or terms, or any other factor regarding finance and mortgage. Homes I have done many times, sell or buy that is…. But what of commercial and business endeavors? Credit, established and stable, assetts ect… so no qualification issues are forseeable. Given these broad strokes, ..what can I and what should I know or research about this. I’d ideally like to transition as painlessly as is realistic, Any pit. What is the floor for the down payment these days? Are the mechanics for an office different than for residential? What should I expect? ; terms ect..?..any pitfalls?

Best answer:

Answer by bianca
commercial lending is different , then residential, because in those types of propertyy’s lender look if this property will bring profit. down payment required is mostly between 20-30%. interest rate is higher, then residential, but depends of the property type. the whole process will take 45-60 days ( in some cases it is faster, but everything depends of other factors- appraisal report take forever and if there is need for other reports- they take times. you also need to pay “points” to get the commercial loan (1-3%)+ closing costs (they are higher then residential and “commitment fee” – could be 0- 00- varies from lender to lender and can be deducted later form your closing costs. usually the lenders don’t offer 30 years fixed programs- they are ballons from 3-5 years with prepayment penalties . there is so many options with commercial lenders, that i give you very general idea how the process look like. i hope i did not scare you….

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