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Graduating from Residential to Commercial Realty Investment, Are You Ready?

March 11, 2015

From time to time, people who are not experienced commercial realty investors call us wanting to get a commercial loan (multifamily or other type), and yet they do not qualify. However, they could qualify for a residential property loan.

How do you know if you are ready to move from residential realty investment to commercial realty investment? There are a number of factors.

First, a commercial mortgage loan has different requirements than a residential mortgage loan. And it is usually harder to qualify for a commercial mortgage loan. What are some of the requirements for a commercial mortgage loan?

  1. Know that if you get a commercial mortgage loan through a commercial mortgage broker, or bank, you will have to put at least 20% down.
  2. It will be easier for you to qualify for a commercial mortgage loan if you live within a few hours driving or so of the property.  
  3. The amount of your net worth needs to be at least the size of the loan.
  4. The amount of liquidity you need is the size of the downpayment, the loan expenses, and around 9 months, possibly 12 months payments.
  5. In some situations, some commercial loan sources will want you to have current ownership of commercial property. And by the way, multifamily property to be commercial needs to be 5 or more units.
  6. A commercial property will need to have high occupancy, unless you get a bridge loan. Commercial bridge loans are a significantly more advanced commercial investment strategy, and are not easy to get.
  7. A commercial property will need to cash flow high enough to qualify for a commercial realty loan.
  8. If you are not strong enough financially to qualify for a commercial mortgage loan, getting a partner who is strong financially is a possible strategy. However, the partner is going to want you to have some serious money to contribute to the purchase.

Contact us if you would like to see if you pre-qualify for our best commercial loan rates and terms - or contact us if you would like to discuss your particular commercial loan concerns. Dial 214-695-7310 or email

To discover more about our loan products and rates, see our loan programs page.

Bruce Painter, Director of Marketing, Business Loan