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What you need to know about obtaining a commercial real estate loan for an owner-occupied property.
Owner-occupied properties are properties that are used to house an owner’s business. Examples include medical offices, restaurants, general offices, retail stores, motels, etc. Commercial real estate loans are loans that are used to finance the acquisition of these properties or refinance these properties (often to free up equity for other business purposes). The self-employed borrowers that own these properties need to work with lenders who understand and have experience lending to small businesses. Many commercial mortgage lenders do not focus on these properties as they lack the necessary experience working with small business owners. When commercial real estate lenders look at an investment property, they look at the rents collected, the expenses necessary to run the property, and calculate the net operating income. This NOI is used to determine the property’s ability to cover the mortgage debt. With properties that are used by the owner, the calculations are different. The lender must understand the entire business operation to determine what income and expenses are attributable to the property and to the business separately. The underlying business must be healthy to take on the debt of a commercial real estate loan. In addition to analyzing the income, lenders also need to understand the owner occupant’s credit scores and ratings. The stronger the credit scores, the less risky the loan. Commercial mortgage rates will often be determined by analyzing both the business’s income and the credit of the applicant. At Select Commercial, we have over 30 years of commercial real estate financing experience lending to small business owners.
Select Commercial can assist you with your 1031 Exchange Financing needs!
Ordinarily, when an investor sells an investment property, the profit realized is subject to capital gains taxes. However, if the investor exchanges the property for another property, the IRS will allow the investor to defer capital gains taxes. This process is called a 1031 Tax Free Exchange. Select Commercial specializes in helping investors utilizing a 1031 Exchange obtain commercial mortgage financing to facilitate the new purchase. Please contact us for more details on 1031 Tax Free Exchange Financing. (Always consult your tax advisor for specific advice when it comes to your tax situation).