Hello all,
Great place to get help, thanks for whoever is responsible for this.
I am looking for a commercial property in northern Kentucky, they are asking for $1.3 million, I have %10 for a down payment and 740+ credit rating, the property has %100 occupancy, last year it grossed $120 thousand (it wasn’t 100% occupied), maintenance etc was $14000, this year it is projected to make 146 thousand.
Property is zoned C2A/many uses, but currently used as medical office.

Now, my question is, can I possibly buy it for 10% down, If yes, how?
Thanks

If you were the medical practice occupying the property, this would be a great situation to use something like an SBA 504 loan, which allows for the purchase of owner occupied commercial real estate with only 10% down payment.

As an investment property, you probably need the seller to take a second mortgage as partial payment. The primary lender is probably going to want to come in with a 75% loan-to-value. Most bank lenders will be looking for this number.

There is a possibility that a non-bank lender would be able to do something for you. That is, either give you a first and a second that total 90% of the purchase price or give you a first for all of the funds needed. They usually are more flexible, but at the same time more expensive.

This is all dependent on the lender doing their due diligence and performing their underwriting. I would personally question that very low number that you listed as operating expenses.

Good luck.

thank you for taking the time to help me with your knowledge.

sadly, am not in the medical field so i would think the SBA loan is out of reach.
i dont understand why lenders would not do it! it practically pays for it self....

thanks again

".....dont understand why lenders would not do it! it practically pays for it self....."

I am going to guess it is risk

Risk of loosing a portion of the money lent as the cushion is smaller

"If you were the medical practice occupying the property, this would be a great situation to use something like an SBA 504 loan, which allows for the purchase of owner occupied commercial real estate with only 10% down payment."

This is a very good point, a lot of other bankers don't give this advice because they are not as profitable as other routes... Kudos Admin;)

We have avenues to structure a project like this and use the 10% vested, while also securing the other 10% with equity in an asset. Definitely something for you to consider. Now of course this would decrease if a seller second is agreed upon. Even if it's 10%, that takes your initial 10% a lot farther. This will help maximize your leaverage and let the property work for you. I would hope the leases in good shape, staggarded and renewable etc... I'd be curious to see about NNN structure as well.


"As an investment property, you probably need the seller to take a second mortgage as partial payment. The primary lender is probably going to want to come in with a 75% loan-to-value. Most bank lenders will be looking for this number."

Typically this is the case, but with the avenue mentioned above is for investment property. Really the contingencies reside in the buildings appearance, grade (class....a b c ) leases, expenses and history. The total picture. This also helps the client tweak where their profit centers can be maximized...

"There is a possibility that a non-bank lender would be able to do something for you. That is, either give you a first and a second that total 90% of the purchase price or give you a first for all of the funds needed. They usually are more flexible, but at the same time more expensive. "

The expense usually comes in the rate over prime... typcially from 150 to 250 over prime. Usualy there is some sort of guarantee that needs to secure the mortgage. (figure 3% of 75% ltv fee for the guarantee portion) I just did one at high 6's. There are also different options to secure the rate. It's a limited time, but can be renewed.

"This is all dependent on the lender doing their due diligence and performing their underwriting. I would personally question that very low number that you listed as operating expenses."

If that low number is accurate for expenses, it's about right for the area for a NNN property.

All in all L.U. I'm impressed with your forthcoming responses. It's nice to finally see someone else who gives it straight. I can't argue with anything you've mentioned, Nor would I want too



I wish you luck on the project.