Financing Commercial Buildings
By Roger Frost
Commercial real estate financing is very
different from home financing. In the latter, the transaction is based on the
value of the home at the time of the sale. When taking financing for your
commercial property purchase, however, financial institutions will base it, in
part, on the value of the business in the future. In addition, commercial real
estate financing can take on very different terms. The way the deals are
structured is based on a number of factors.
Depending on the situation, proper commercial property financing can be one of the most challenging sources of capital to locate and secure for your business. The scope of commercial property sales is significantly smaller than the residential market. Shopping around can greatly enhance your choices and options of mortgages and loans available.
Some of the more common commercial bank financing requirements are; Banks will usually not finance more than 75% of the appraised value of the property; Properties must show sufficient debt-repayment ability by way of a ratio of 1:20X or higher; In case that the property financed is occupied by a sole tenant (commercial warehouse) the lender might want to take a look at the financial strength of the tenant; You will need to provide an updated rent roll to the lender, which might require the same every year and if the property is not residential in nature, the lender might require an environmental audit (phase-I) to find out any possible contamination of the site.
Typical bank requirements for financing Income Producing Properties (Shopping Strips, Apartment Buildings, and Commercial Warehouses) are commonly; Property must show sufficient debt repayment ability; banks will typically only finance 75% of appraised value; credit history of tenants or tenants and an environmental assessment if required.
Institutional investors refer to organizations which pool large sums of money and invest those sums in a commercial property. They include banks, insurance companies, retirement or pension funds, hedge funds and mutual funds. The goal of institutional investors is to invest in a property that produces rental income. Institutional investors look at expected capital appreciation and rental yields. Location is not of importance. Typically, institutional investors will use an agent in order to secure a property.
The Commercial Building Inspector provides inspection services to most of Southern Ontario. With the experience of inspecting Plaza's, Industrial Buildings, Warehouses, Offices, Combined Occupancies, strip plaza's, churches, schools and hospitals, the Commercial Building Inspector can provide the expertise to protect your Commercial Property investment. As a Certified Building Code Official with the Ontario Building Officials Association and an experienced Thermographer in infrared technology your inspection will be detailed and comprehensive. Visit www.commercialbuildinginspector.ca for purchases in Southern Ontario Region.
Depending on the situation, proper commercial property financing can be one of the most challenging sources of capital to locate and secure for your business. The scope of commercial property sales is significantly smaller than the residential market. Shopping around can greatly enhance your choices and options of mortgages and loans available.
Some of the more common commercial bank financing requirements are; Banks will usually not finance more than 75% of the appraised value of the property; Properties must show sufficient debt-repayment ability by way of a ratio of 1:20X or higher; In case that the property financed is occupied by a sole tenant (commercial warehouse) the lender might want to take a look at the financial strength of the tenant; You will need to provide an updated rent roll to the lender, which might require the same every year and if the property is not residential in nature, the lender might require an environmental audit (phase-I) to find out any possible contamination of the site.
Typical bank requirements for financing Income Producing Properties (Shopping Strips, Apartment Buildings, and Commercial Warehouses) are commonly; Property must show sufficient debt repayment ability; banks will typically only finance 75% of appraised value; credit history of tenants or tenants and an environmental assessment if required.
Institutional investors refer to organizations which pool large sums of money and invest those sums in a commercial property. They include banks, insurance companies, retirement or pension funds, hedge funds and mutual funds. The goal of institutional investors is to invest in a property that produces rental income. Institutional investors look at expected capital appreciation and rental yields. Location is not of importance. Typically, institutional investors will use an agent in order to secure a property.
The Commercial Building Inspector provides inspection services to most of Southern Ontario. With the experience of inspecting Plaza's, Industrial Buildings, Warehouses, Offices, Combined Occupancies, strip plaza's, churches, schools and hospitals, the Commercial Building Inspector can provide the expertise to protect your Commercial Property investment. As a Certified Building Code Official with the Ontario Building Officials Association and an experienced Thermographer in infrared technology your inspection will be detailed and comprehensive. Visit www.commercialbuildinginspector.ca for purchases in Southern Ontario Region.
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