Minimum Down Payment on Commercial Property Purcahse
I want to purchase a commercial property but looking for a bank that require minimum down payment. I've been in contact with a couple and they've been requiring hefty down payments.
[{"id": "hmbp0bk", "text": "You won't find any lender willing to go lower than 20%. Most will want 25%.", "replies": [{"id": "hmewozr", "text": "All commercial banks apply to fundamental rules minimum LTV and then Debt to service coverage ratio (dscr).\n\nhttps://en.m.wikipedia.org/wiki/Debt_service_coverage_ratio\n\nSo unless you have a good spread between cap rate and interest ur down payment will shoot up. In california that results in very high downpayment 30 to 50%.\n\nWhat I am looking for is banks realign to consider proforma for the DSCR.\n\nAlso sba loans are awesome ,  but then capped at your business size.", "replies": [{"id": "hmgqvcu", "text": "Never heard \u201cdebt to service coverage ration\u201d before.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hmbp3bp", "text": "Welcome to the commercial world. You\u2019re probably going to need 20% down plus a net worth that exceeds the value of the loan. Bring in partners to get there if needed.\n\nYour best bet to avoid that is to get owner financing from an existing owner. That\u2019s possible, but you have to be willing to call a lot of owners and buy what they are willing to finance.", "replies": [{"id": "hmbpfl3", "text": "I figured so just wanted to ask -- i haven't found a lender that even would do 20% most have been 30% and up", "replies": [{"id": "hmbtgfi", "text": "Makes sense, especially for an inexperienced CRE investor. Seasoned vets will get 80% LTV but even still that\u2019s rare.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hmbq898", "text": "20-40% is the typical down payment", "replies": [], "depth": 1}, {"id": "hmbv14o", "text": "Depends on the type of property. Multifamily you can get 20-30% down, but for retail, office or industrial you\u2019re gonna be hard pressed to get a lender to go below 35% even for the best quality assets.\n\nFor low quality retail/office you\u2019ll be lucky to not have to put down 45-50% right now.", "replies": [{"id": "hmc2d90", "text": "That\u2019s really not true in decent markets. Lenders are desperate for industrial, I have several deals right now at 80% LTV for occupied industrial", "replies": [{"id": "hmc8cid", "text": "Yeah sorry shouldn\u2019t have put industrial on that list given where it\u2019s at in the market, although 80% on industrial is definitely outside historical norms and more a factor of current market conditions, whereas 70%+ has been the norm for MF for years!", "replies": [{"id": "hmc8oj9", "text": "No worries. You\u2019re absolutely correct regarding historical. But this sub is pretty sophisticated and people hopefully won\u2019t rely on posts greater than 2-3 months", "replies": [{"id": "hmd8ocg", "text": "Buying a 2 unit office building one side of building i will use and other side will be rented out. Been renting it for years and owner finally wiling to sell", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "hmevzd1", "text": "Agree with this - my bank in MN agreed to 20% on an Industrial purchase this December.  Had to fight tooth and nail though and they only formally approved after the appraisal.", "replies": [], "depth": 3}], "depth": 2}, {"id": "hmeael6", "text": "Not entirely true. I\u2019ve only put down 25% for an office space.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hmbvs6x", "text": "For multifamily, we've seen somewhere around 23%-35% downpayment expectations.", "replies": [], "depth": 1}, {"id": "hmc2nlk", "text": "Hard money is the only option. You will pay through the nose on the rate. There are personal guarantees though.", "replies": [], "depth": 1}, {"id": "hmc43mh", "text": "Sba if you are going to occupy and run a business there 15% down , lot of paperwork needed though . Look for a good broker to help you thru", "replies": [], "depth": 1}, {"id": "hmc4lva", "text": "OP just made a statement.\n\n(I presume there's a question somewhere).", "replies": [], "depth": 1}, {"id": "hmc5pcc", "text": "My experience has been the following\n\nI will mention one loop hole. If you buy a property to owner occupy with your business you can do a SBA or Bank loan as long as your business occupies 51% of the property, and then you can lease out 49% of the property\n\nOwner Occupied (you own the business that operates at the property) 10% minimum with great Business Finances, but more likely 20% to 25% down. You can do 10% down with almost any business if your willing to go SBA and pay their fees and interest rate which is higher but fixed for 25 years\n\nInvestment Property (non residential) with Credit Worthy Tenants, Cash Flow, and Good Leases at least 3 years but preferably 5+ years is generally 20% minimum but they would prefer 25%+\n\nInvestment Property (non residential) Unoccupied/No tenants or Tenants without long leases (which is unoccupied according to the bank). It is a complete toss up. If your just starting out and your net worth won't cover it they will probably want 50% down if they will do it all. If you do have a good net worth or a lot of income they will probably do it for 25% in my experience, because they figure you can cover it.\n\nAs others have mentioned owner financing is your best bet to get started without a lot of income or net worth. I have done most of my owner financing deals at 10% to 15% down, but you usually have to pay a 1% interest premium. Best advice here is just make an offer and ask for financing. All they can say is no.", "replies": [], "depth": 1}, {"id": "hmcz5k6", "text": "What???? Where do you just have to put 20-25% down for a commercial deal? Canada or US?", "replies": [{"id": "hmjgz1a", "text": "US, not sure what canada requires", "replies": [], "depth": 2}], "depth": 1}, {"id": "hmd9j0k", "text": "25-30% down. I\u2019m a commercial banker and finance investment real estate all the time. Factors that affect LTV include property type, location, stabilization etc", "replies": [{"id": "hmd9lb8", "text": "What lender would you recommend?", "replies": [{"id": "hmeg7az", "text": "In my experience local/regional banks are much more open to working with new investors on commercial property. Preferably a local/regional bank that you already have a relationship with and if you don't have a relationship with a local/regional bank I would suggest you develop one asap.  Before choosing a bank though be sure to meet with their commercial lending department and tell them what your long-term plans are and see what their interest is in working with you on these loans.\n\nThe biggest difference with the small banks is that the commercial loan officers are most likely allowed to approve loans up to 750k on their own which cuts down on a lot of the red tape. If your loan exceeds that amount generally there is a committee of only three to five people that make the decision on loans, and your loan officer which you deal with directly will make your case to this committee. This all comes back to the relationship with this bank.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hmedr42", "text": "Lender requirements differ based on the client.  If you don't have strong financials or the property you're seeking to acquire is not generating revenue, the amount of capital required from you will be higher.  Lenders, in general, do not have a \"set standard\" for commercial lending\".\n\nYou need to speak with a loan officer from all your local banks to determine which suits you best.", "replies": [], "depth": 1}, {"id": "hmefut9", "text": "Lenders typically will do 50-75% LTV.", "replies": [], "depth": 1}, {"id": "hmeo39v", "text": "The real question you should be asking is what CLTV do they allow.", "replies": [], "depth": 1}, {"id": "hpelvcy", "text": "I can do 20% but the property needs to hit the minimum DSCR. Pm me", "replies": [], "depth": 1}]