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Commercial Income Property Financing: Part 1 of 3
Welcome to this first portion of a three-part series about income property. In this first segment we will be discussing financing options for commercial income properties as well as the upside (and downside) of owning this type of property. If you're interested in getting into the income property business, chances are you'll need financial assistance from your local bank or private lending institution. You'll soon discover that making sense of the many different options available can be confusing if not down right frustrating. If you're new to the income property market you may be unfamiliar with some of the terminology you'll hear. The purpose of this article is to assist the novice in getting a good start in this potentially lucrative industry. There are many different options available to you depending on the type of income property you're interested in investing in. Most lenders will recognize three separate and distinct types of property, each with it's own financing requirements. These properties include commercial, residential, and industrial income property. Commercial Income Property If you plan to invest in a commercial income property, you're probably planning to rent the building to retail businesses for use as office or warehouse space. As a commercial income property owner you can benefit from a perk not usually available to residential or industrial income property owners; you have the option to charge a percentage of your tenants monthly income in addition to a set monthly rent. This percentage is usually based on the gross monthly sales revenue of your tenant. For example, the rental contract may include a $5000 per month base rent amount plus 5% of the tenant's gross sales for the month. If you're tenant brought in $20,000 of revenue last month, you get an additional $1000 on top of the $5000 base. You may be unfamiliar with this type of arrangement, but it is actually quite common. If you purchase retail income property with good location in a growing neighborhood, this can be a good way to capitalize on your tenant's growing business without raising rent. Most income property owners charge from 5% to 10% of their tenants' gross monthly sales revenue. When it comes time to finance the purchase of your commercial income property, a private lender can usually provide better options and interest rates than your bank or credit union. A private lender is in a position to provide the best option for two main reasons; 1) unlike your local bank, private lenders specialize in income properties (as opposed to home loans), and 2) private lenders are more selective in their loan requirements allowing them to provide better terms for those borrowers they accept. Loan terms (the time the lender gives you fully repay the loan) for commercial income property typically ranges from five to twenty years. Many private lenders will also have a minimum and maximum loan amount which usually goes from $500,000 to $2 million. Interest rates can run from 5.60% to 7.20%; substantially lower than the most competitive bank. It's also important to know your lender's LTV (loan-to-value) ratio. The LTV is simply the ratio of money borrowed on a property to the property's market value. In other words, you will have to come up with a certain amount money yourself before you will be considered for a loan. Currently, most private lenders offer LTV's of 70% to 75%. If you plan on financing the purchase a $1.5 million office building with a lender offering a 75% LTV, you will need to come up with at least $375,000. In the next segment, Residential Income Property Financing: Part 2 of 3, we will be discussing how to finance and effectively manage an apartment complex. Cameron Brown is an internet marketer specializing in investment property. For more information on income property, please visit Security National Capital
MORE RESOURCES: Sellers are flooding the home market while buyers sit on their hands in these US cities — creating a historic imbalance New York Post The housing market is finally buyer-friendly. Here’s where sellers are cutting prices. - MarketWatch Real Estate Transactions, June 16 edition Hopkinton Independent Erie County real estate transactions Buffalo News Real estate transactions sungazette.com Trump Just Disclosed He Received Millions Of Dollars From This Saudi Real Estate Developer Last Year Forbes Selig loses control of 9 more assets, including company's headquarters tower - The Business Journals Selig loses control of 9 more assets, including company's headquarters tower The Business Journals Real estate transfers in Adams County from June 2-6, 2025 Muddy River News Real estate broker’s take on Denton housing market: Price cures all defects Denton Record-Chronicle Take a look at the most expensive Central Jersey homes sold in May Central New Jersey News Real Estate Transactions | June 2-6, 2025 Republic-Times U.S. Commercial Real Estate Market Turns a Corner Amid Rising AI Momentum and Shifting Demand Patterns Boston Real Estate Times 34th annual Real Estate Center Dinner spotlights students, program supporters University of Cincinnati eXp Realty Honored by National Association of Hispanic Real Estate Professionals Direct Selling News Compass sued over unsolicited calls, texts Real Estate News by RealEstateNews.com Real Estate Sold: June 18, 2025 Lebanon Local House on Georgetta Drive sells for $1,925,000 East Bay Times Conversational marketing is the new pipeline: How AI is redefining intent in real estate HousingWire The Boulos Company Brokers Sale of Fully Leased Commercial Property in North Hampton, NH Boston Real Estate Times Kayne Anderson Real Estate closes opportunistic debt fund at nearly $1.7bn Alternatives Watch Katelyn Klingler Leveque & Kiamesha-Sylvia G. Colom: What real estate brokers should know from the 2025 Legislature The Indiana Lawyer CIBS-LI launches “Square Feet” real estate podcast Long Island Business News Keller Williams slapped with another telemarketing lawsuit Real Estate News by RealEstateNews.com Real Estate Roundtable: Brandon Craft Baton Rouge Business Report REAL ESTATE BRIEFS: Oakbend community under development in Wellen Park Sarasota Herald-Tribune Real Estate Roundtable: Jackelyn Gallo Baton Rouge Business Report Hamptons Real Estate Market Data – Week of 6/10/2025 Hamptons.com CEO of commercial real estate firm Boerke to step down this month BizTimes - Milwaukee Business News REAL ESTATE | Open House events at Cedar Creek Townhomes in Jackson, WI | By Jo Sadownikow Washington County Insider Announcing the Business Journal's Best Real Estate Projects for 2025 The Business Journals Bay CIty, OR 3BRD Decker Real Estate MLS 25-291 Tillamook Headlight-Herald Refined Real Estate: Unique A-frame in Issaquah lists for $1.89M Seattle Refined Globalworth Real Estate Investments (LON:GWI) Shares Pass Below 200 Day Moving Average - Here's Why MarketBeat Walker joins real estate firm Prologis's investment unit - Global Venturing NAHREP names Illinois’ top Latino real estate agents by transactions Chicago Agent Magazine 290-Unit Bria Celebrates Grand Opening of The Beck in Haverhill Boston Real Estate Times State legislature approves tax incentives to boost businesses, jobs and commercial real estate Brooklyn Eagle Blueprint: Brookfield’s next real estate chief, Ares and PIMCO raise billions for data centers and more Private Equity Real Estate | PERE Central Mass. real estate transfers for Sunday, June 15 Worcester Telegram 2025 Epique PowerCON Accelerates the Future of Real Estate The National Law Review E-Leon: Prioritizing Mental Health in Real Estate Arizona Digital Free Press Real Estate Roundtable: Becky Walker Baton Rouge Business Report Nemmers Realty Bellevue Herald Leader Greater China property, finance firms face rising distress: AlixPartners South China Morning Post Saudi Arabia Real Estate Market Set to Surge to USD 132.65 Billion by 2033 at a 7.0% CAGR openPR.com MLB star turned real estate developer Alex Guerrero asks $75M for a Miami spec mansion — with an 18-car garage New York Post Radio Real Estate 6/14/25 My Bellingham Now See how much real estate prices have changed in Napa last week The Press Democrat Real Estate in the Modern Era: Investing Beyond Bricks and Mortar Muddy River News Vendor & Real Estate Partners Dollar Tree Pinellas Beaches Real Estate June 10-16 The Gabber Newspaper June 6-12 Gulfport Real Estate Sales The Gabber Newspaper Racquet Clubs: The New Status Symbols in Real Estate hauteresidence.com Lawrence mayor on taxes: ‘We need more people to share the burden,’ he tells local real estate leaders Lawrence Journal-World Household Real Estate Asset Value Falls to Start the Year Eye on Housing ‘AI agents’ are coming — here’s what you need to know Real Estate News by RealEstateNews.com |
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