Commercial buildings are different than residential buildings. That means commercial mortgages are also different to their residential counterparts. The qualification process for a commercial mortgage is based primarily on the asset itself rather than the borrower.
The borrower would qualify based on the cash flow of the building rather than their own personal income. This presents a greater number of opportunities for those who are looking to invest in commercial real estate and don’t claim much personal income or are “fully leveraged” through residential channels. There are many benefits to investing in commercial property such as:
Better Leases - Commercial leases are longer than a typical residential lease, ranging from 2 to 10 years. These leases frequently have re-signing privileges.
In many cases, the tenants will also pay maintenance costs and other costs to upkeep the building such as insurance or property taxes. It creates more predictable income and you’re spending less time vacant and looking for new tenants.
Rent & Value - Commercial properties are valued based on the income approach. Meaning the greater the cash flow of the building, the more it’s worth. When you do repairs and upgrades on the building you charge more rent. The building then appreciates both because of the capital improvements and by virtue of greater cashflow when rents go up.
Regulation & Management - There is less government regulation for commercial property. If the tenant does not pay their rent you can evict them or hold their equipment. When compared to residential, commercial property management is also much easier. Tenants are much more incentivized to pay rent. Another benefit is the qualification process. When analyzing a commercial deal, the lenders look at the age of the building, the cashflow, and the location. There are only a few personal factors they look at such as credit, net worth and experience.
We can look at providing financing for many different kinds of assets and uses, such as:
5+ Unit Residential Buildings - Commercial Retail Units - Malls - Hotels/Motels - Trailer Parks -
Owner Occupied Commercial Units - Mixed Uses - Industrial Property