Investment Loan Overview
The most common commercial investment property types are: office, retail, industrial/warehouse, self-storage, and hospitality, although other property types may be considered on a case-by-case basis. In order to underwrite an investment property, we use the in-place cash flow over the annual debt payments (with a pre-determine underwriting interest rate). The required debt service coverage ratio (DSCR or DCR) changes based on the property type, LTV, and program.
Conventional Loans
A Conventional Loan is a mortgage that is provided by a bank, credit union, savings institution, or other traditional financial institution and is secured by a first lien position on the subject property being financed. The collateral may be any type of commercial real estate and do not always require previous experience. These loans are typically best suited for inexperienced borrowers, small loan balances, specialty properties, or any other structure that may require a personal guaranty.
| Loan Type | Rates | Properties | Loan Amount | Max LTV | Term | Amortization |
|---|---|---|---|---|---|---|
| Conventional | 5.08% - 8.75% | Apartment, Hotel, Industrial, Medical, Mixed-Use, Office, Retail, Self-Storage |
$1,000,000+ | 75% | 3 - 15 Years |
15 - 30 Years |
Conduit / CMBS Financing
Conduit / CMBS loans are securitized loans that are pooled and sold on the secondary market. They are available nationwide in all markets and are available for stabilized properties with a minimum $2 million loan amount. CMBS commercial loans are typically only for office, retail, industrial, flagged hospitality, and self-storage. Maximum leverage is 75% on both purchases and refinances and loans are always non-recourse.
| Loan Type | Rates | Properties | Loan Amount | Max LTV | Term | Amortization |
|---|---|---|---|---|---|---|
| CMBS | 5.92% - 7.79% | Apartment, Hotel, Industrial, Medical, Mixed-Use, Office, Retail, Self-Storage |
$2,000,000+ | 75% | 5 - 10 Years |
20 - 30 Years |
Insurance Loans
An Insurance commercial real estate loan is a mortgage that is provided by a life insurance company or conglomerate of life insurance companies and is secured by a first lien position on the subject property being financed. Most insurance companies favor the “four food groups,” for their collateral (apartment, office, retail, and industrial properties), but may finance other property types (i.e. hotel or mixed used) on a case-by-case basis. These loans are typically best suited for transactions that have strong borrowers with good credit, newer, well-maintained properties, low leverage, and where the collateral is situated in or around a major MSA.
| Loan Type | Rates | Properties | Loan Amount | Max LTV | Term | Amortization |
|---|---|---|---|---|---|---|
| Insurance | 5.42% - 8.62% | Apartment, Hotel, Industrial, Mixed-Use, Office, Retail |
$5,000,000+ | 75% | 5 - 30 Years |
15 - 30 Years |
United States Department of Agriculture (USDA) Loans
USDA Loans are available for any commercial property type in rural areas with populations of less than 50,000 people. LTVs, term length, prepayment penalties, and other loan terms will depend on the conventional lender in partnership with the USDA, which is guaranteeing the loan.
| Loan Type | Rates | Properties | Loan Amount | Max LTV | Term | Amortization |
|---|---|---|---|---|---|---|
| USDA | 6.00% - 8.75% | Apartment, Hotel, Industrial, Medical, Mixed-Use, Office, Retail, Self-Storage |
$1,000,000+ | 85% | 5 - 15 Years |
15 - 30 Years |
Bridge Loans
Bridge loans are used for the light rehabilitation and/or stabilization of a commercial real estate property including office, retail, and industrial/warehouse. Cash flows are underwritten to pro forma numbers, but still must meet a 1.0x DSCR with current cash flow. Loans are generally recourse for most programs.
| Loan Type | Rates | Properties | Loan Amount | Max LTV | Term | Amortization |
|---|---|---|---|---|---|---|
| Bridge | 5.75% - 12.75% | Industrial, Medical, Mixed-Use, Office, Retail, Self-Storage |
$3,000,000+ | 75% | 1 - 3 Years |
15 - 30 Years |
Construction Loans
Construction loans are for the ground-up construction or substantial rehabilitation of any commercial real estate that cannot currently service loans at a 1.0x DSCR. These loans are generally interest-only until stabilization at which point that loan will either convert to an amortizing model or must be refinanced. Loan amounts and LTVs depend on the program under which the project is financed.
| Loan Type | Rates | Properties | Loan Amount | Max LTV | Term | Amortization |
|---|---|---|---|---|---|---|
| Construction | 5.50% - 8.75% | Apartment, Industrial, Medical, Mixed-Use, Office, Retail, Self-Storage |
$3,000,000+ | 75% | 1 - 3 Years |
15 - 30 Years |
