Questions on how commercial differs from residential.

[Leslie L.]

Hi everyone,

I have a good understanding of how residential RE works and how to go about purchasing but I would really like to know more about commercial.

I know with residential when you are working with an agent, you have to be pre-approved and basically have the proof of funds in place before you can even make an offer.

With commercial however, do you have to have the proof of funds up front when you make an offer? For example, say I look at a 20 unit multifamily property. I like the property and the numbers look great. I make an offer on the property and it is accepted by the seller. Along with this offer I give them the earnest money deposit. My goal in financing the property would be to bring in a private investor to put up all of the down payment and then get a traditional commercial mortgage for the rest of the purchase price.

Is this how purchasing commercial property can work? Can you put a property under contract without the funding lined up right away with the intent of bringing in a private investor to fund the down payment? In essence with the earnest money check, wouldn't that show that I am committed to the deal because if I couldn't line up my own funding before closing, I would lose that money.

Just in my thinking it would be easier to attract private investors to a commercial deal if you already have it under contract and can show them real numbers instead of pro-forma numbers based off of some hypothetical property that might not even exist.

Thanks BP!