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If you want to make money from real estate, you have many options. One of the most lucrative starts with buying commercial real estate property. Whether you want to buy an apartment building or an office space, you will have to find a commercial real estate loan. Commercial real estate loans are available on different terms than residential mortgages and through different lenders.

Before you seek out a commercial real estate lender, know how much money you want to take out and what terms you are willing to accept.

Don’t be surprised at commercial real estate loan terms.

Borrowers take out commercial and residential mortgages with different goals in mind. Lenders also have different risks to consider when they give out commercial real estate loans. Before you start to look for lenders, know what loan terms you might face and how these differ from residential mortgages.

Amortization Schedule

Residential mortgages are usually 30-year fixed-rate terms. Commercial lenders usually offer a 5-year “balloon loan” that must be paid back over 25 years. The initial rate is fixed for five years and then the lender and borrower sit down to renegotiate the terms for the next 20.

Down Payment

Borrowers can get a residential mortgage by paying a 20% down payment, although some lenders approve the loan with 3.5% down or no money down. Commercial lenders usually ask for 75% of the purchase price; borrowers will have to cough up a 25% down payment.

Who signs the loan?

Real estate lenders are more likely to approve a loan signed by a limited liability company (LLC) or a partnership. If you have not formed an LLC yet, you may want to consider taking these steps before you look for a commercial real estate loan.

How to Find a Commercial Real Estate Lender

Before you narrow down your search for a commercial real estate lender, think about the size of your loan. Certain lenders will only give out loans within a specific price range. Let’s break down the different types of lenders and what types of loans they usually work with:

Credit Unions

If you are looking to purchase a smaller property and need to take out less than $100,000, choose a local credit union. Unlike banks, credit unions are nonprofit organizations. They tend to offer lower rates on loans, but typically don’t give out more than six figures.

Community Banks

If you want to take out between $100,000 and $2,500,000, talk to community banks in the area where the property is located. (Borrowers who want to take out just over $2,500,000 shouldn’t immediately cross-community banks off of their list; some lenders will be able to approve up to $15,000,000, but this depends on the individual.)

The loan officer at the community bank will be able to offer more than just a mortgage; they will also be able to give you insights into the market and how buildings are currently priced in the area where you want to buy.

Local and National Commercial Banks

If you want to take out more than $2.5 million, consider looking at local and national commercial banks. These banks don’t see as much risk loaning out $10 million as a community bank does. Similar to a residential mortgage, you will want to shop around for different loan terms before you decide on a lender.

Fannie Mae, Freddie Mac, FHA

If you are looking to purchase apartment buildings, you may also be able to get financing through Fannie Mae, Freddie Mac, or the Federal Housing Authority (FHA.) FHA loans have some of the longest loan terms and may be available for lower rates. Fannie Mae and Freddie Mac offer 10-year loans, but these loans come with a fixed rate. These loans are non-recourse loans, which alleviate the responsibility of the individual to guarantee the loan. Borrowers may have to pay a higher down payment but the flexible loan terms may be worth the price.

Seek Out A Broker For The Best Deals

If you have experience looking for a residential mortgage, you may feel confident negotiating or choosing the best deal on your own. Commercial real estate loans are a different ball game. Connect with a local commercial mortgage broker. They will be able to show you how to find a commercial real estate loan and where to get the best deals. They have spent time building up relationships with the lenders that can give you a loan; their connection could get you the best terms.


Andrew Schmeerbauch

Andrew Schmeerbauch is the Director of Marketing at Clever Real Estate, the free online service that connects you top agents to save on commission. His focus is educating home buyers and sellers on navigating the complex world of real estate with confidence and ease. Andrew has worked on projects for the United Nations and USC and has a particular passion for investing and finance. Andrew's writing has been featured in Mashvisor, L&T, Ideal REI, and Rentometer.

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