In the last lesson we reviewed the costs of getting into commercial property.

In this lesson we’re going to review how you can get financed on your first commercial property deal.

A question we often hear, 
‘I can no longer afford residential, so How Can I Buy Commercial?’

There’s a secret in commercial property you need to know that doesn’t apply to residential property investing.

With a commercial property loan you can document and submit the income of the tenant – lease income – to cover the loan.

The bank will review this and see this as an asset, as long as you have a signed agreement.

How does a Lease Doc Loan work?

The bank will review the interest payments owed to them and compare the lease payments by the tenant.

This type of loan will be approved as long as the bank can see a clear surplus, where your tenants lease payments will more than cover the monthly interest payments.

Loan To Value Ratio will be a critical factor in how much of a deposit you will need for your loan. In most cases this LVR will be 65% of the total purchase price. Meaning they will lend you enough money to cover 65% of the purchase price.

Deposit will be 35% in most cases. Based on the example in the video, if it is a $1,000,000 property, you will need $350,000 to cover the deposit.

Additional Costs will be 5% to 7% as we shared in the prior lesson that you need to keep in mind.

Options to Finance Commercial Property

There are a variety of options to finance commercial property, that will help you to get started. We’ve seen many first time commercial investors find a way to accomplish their first deal and start building their portfolio.

Deposit
Equity
Joint Venture Partner
Existing Properties

Next Up Lesson 6 What Purchasing Entity Should You Use?