Commercial Lending 5 - 7 Year Term - How Do You Hold Long Term?

[Bob D.]

Total newbie question here but I'm searching for 5+ unit multi families and commercial loans only have 5, 7 or 10 year terms. I understand that refi is part of the process, but this seems to force a refi that could conceivable come during downturn and ruin a strategy.

What am I missing here? How can you buy for long term cash flow when you're forced to change lending terms every 5 - 10 years? 

[Jeff Kehl]

@Bob D.those commercial loans also amortize over usually a 15-20 year period. What that means is after the 5-7 year term you usually would have built up quite a bit of equity even if the property has not appreciated. These are the only type of loans I use and when they expire it is simply a matter of meeting with the loan officer and putting new financing on the property. If things are going well with the property you won't have an issue. 

Of course there is a possibility that interest rates will spike or vacancy will rise but that is not the likely outcome. I think it is wise to think about what you would do if that did happen though and think through contingency plans.