Commercial vs residential loan

[Steve Davis]

Hello BP,

I recently spoke to my mortgage broker as I am in the process of acquiring a residential property. I am working with an A lender at a conventional institution and he has no problem financing houses for me as my investor continues to show strong annual income. The problem is that my investor is retiring soon and won't have nearly as much annual income/dividends in the years to come so my lender will no longer be able to finance houses for us. I was told residential loans are based on income and not equity or net worth (I live and invest in Canada).

If I were to acquire a commercial property with an A lender would they lend based on equity and net worth or would they still require a significant amount of annual income? My lender is strictly residential and was not able to answer this question.

Thank you,

Steve

[James Hamling]

@Steve Davis I had this friend who came from a long time REI family, although she had little to nothing going at the time. She had average income at best. One day she asked me to come help inspect and evaluate a property she was buying, so i went to help her pro-bono. We pulled up to an 88 unit apartment complex community, 4 buildings. I asked her how this was supposed to be funny, she kept telling me it was legit and then showed me the PA, it was legit. I then demanded to come with to the commercial lender because I had to see this to believe it. I went and to my shock there everyone was happily processing the near $4m financing for a person who made mid $40k. When done I asked the lending office exactly how any of this made sense and he told me with a chuckle "who other than Bill gates has the kind of personal income to qualify for a $4m loan, nobody, so we don't care, I just look at what the property does to qualify itself, and can this person not screw it up and make it work". She worked in property management and came from a REI family, done deal.

After that I was convinced literally anything is possible in the world of commercial finance.