Commercial Financing Questions 101

[Jeff Helm]

Hey all, well like most of us I started investing in single-family homes, and now would like to move into multi family apartment buildings. I have a few questions below to help me prepare for entry into this market. I hope you all can help answer my questions, and happy investing! 1. When applying for commercial financing will the banks review my personal credit score? 2. What is the expected down payment, cash I need to have, when financing commercial property? 3. Can anyone recommend a financial institution for commercial financing in the metro Detroit area? Thanks Jeff

[Joseph Gozlan]

Hi @Jeff Helm

I went through the same journey so I can relate :-)

Here are a few short answers:

1) Yes. If you are the sole/lead investor the banks will look at your personal financial strength and it doesn't matter if you buy a duplex or 200 units. The smaller the deal the more interest they will have in your personal financial strength and the higher the chances they will ask you to be a guarantor on a recourse type loan. Somewhat counter intuitive, I know.

2) 20%-30% is the "norm" but it can go anywhere depending on how creative you can get with the financing.

3) Yo didn't describe what kind of properties you are going for. There is a HUGE difference if you are trying to buy a 1-4, a 30 units building or a 500 units apartments complex...

You can also find some great commercial and private lenders right here in BP.