Typically what’s the minimum down payment percentage for a commercial property?
Question
[{"id": "i91m8f8", "text": "20%", "replies": [], "depth": 1}, {"id": "i91mhnw", "text": "We need more information to answer this question. \nIf it is an SBA loan as an owner user purchase and good financials it is 10% down.\nMost multi family is minimum 20% down on a great cash flow investment. More likely 25%. \nAny other investment will typically be 30% minimum. (Office, industrial, retail)\nCMBS deals are 20% and non recourse but typically have big prepayment penalties and assumption fees and are usually utilized by more seasoned investors.", "replies": [{"id": "i91mo5w", "text": "Thanks,\n\nSorry I was referring to the retail, office , and industrial properties. A guy was telling me a minimum of 50% needs to be put down for those types of properties.", "replies": [{"id": "i91nhnn", "text": "This is a fluid answer depending on market conditions and a lot of other factors (deal size, sponsorship reputation, location, credit quality of tenants, etc). Generally, you\u2019re going to have to put in 20-35%. Lower end of the range will likely include a structured Capital stack (mezz, pref equity, etc), whereas at 35% you can probably get away with all mortgage.", "replies": [], "depth": 3}, {"id": "i91nk5k", "text": "It depends on the market and the deal. What is the market and what is the cap rate and size of deal. I\u2019d call a couple of banks and see what sort of loan products are out there. Assuming you have a good cash flowing deal with strong leases/tenants, you should be able to get 70% ltv.", "replies": [], "depth": 3}, {"id": "i928rek", "text": "I'm in a hot sunbelt market where cap rates for high quality MF haven't really budged with the recent run-up in interest rates, but buyers are going in with 50-60% LTV. I don't believe 50% is the norm across all qualities though.", "replies": [{"id": "i92wncm", "text": "Ok got it I\u2019m assuming the guy I was talking to was referring to the area we reside in which is Los Angeles County. Question why would the LTV be lower in a hot market?", "replies": [{"id": "i93n8h8", "text": "With lower cap rates on Retail, Office, and Industrial that are seen in LAC, and rising interest rates you are probably running into a debt service ratio issue.  Typically the most aggressive debt service you can get is 1.25.  The debt needs to be covered by the free cash flow to have a cushion in commercial lending (especially non-recourse or limited recourse debt).", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i9227g6", "text": "Multifamily - 20% for Agency/CMBS financing, 25% for bank/credit union financing. \n\nEverything Else - 25%-35% unless you\u2019re doing CMBS financing. \n\nWith cap rates like they are, hitting 75%-80% leverage is far less common than it use to be. Most stabilized multifamily deals size to around 65%-75%. Credit tenant NNN deals usually top out around 60%-65%. Most office still sizes to 75% if you don\u2019t have a ton of short-term lease roll. Industrial used to be 75% all day but cap rate compression has most deals sizing to 60%-70%. \n\nCommon sizing metrics are 8% debt yield for CMBS, 1.25x DSCR for Agency, and 1.25x DSCR for banks/CUs but they tend to consider global cash flow more often as well.", "replies": [], "depth": 1}, {"id": "i922lsr", "text": "Yes.", "replies": [], "depth": 1}, {"id": "i92475t", "text": "25-30% or so if you\u2019re talking about non-SBA commercial bank loans.  D", "replies": [], "depth": 1}, {"id": "i927piu", "text": "One key element that I am not seeing mentioned is cashflow coverage. If it's an empty building, how are you going to make the mortgage payments? You will need to have a low LTV,  adequate cash reserves, and a solid plan for getting it leased up. If it's a fully leased apartment building that doesn't have maintenance issues, you can get away with a higher LTV (lower down payment). \n\nProperty type, occupancy levels, tenant quality, building condition, property location, your cash reserves and global cashflow, and your previous experience as  commercial property owner (and probably a few other things that don't come to my mind at the moment) affect how much of a down payment you will be expected to make.", "replies": [], "depth": 1}, {"id": "i92yavy", "text": "I mean minimum minimum is zero down. But I\u2019ve heard 25% from a few lenders as the typical minimum.", "replies": [], "depth": 1}, {"id": "i93k7pk", "text": "Minimum down payment for commercial properties is typically 20%-30%; depends on the market, the property class, how strong you are as a borrower and your relationship with the lender.", "replies": [], "depth": 1}, {"id": "i93tm45", "text": "Minimum 15-25% sometimes 30% depending on the bank/credit union. But, never 50%. Also, you should have 40% just to cover the repair or anything that might come up just in case.", "replies": [], "depth": 1}]