Simply put, a commercial real estate loan is a transaction between a lender and a company. These loans come in many shapes and sizes including:
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A conventional commercial real estate loan is a fixed-rate mortgage loan typically originated by a large bank. If you also use the investment as a primary residence, you may be eligible for Federal Housing Administration (FHA) loans.
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A commercial bridge loan is a short-term loan that can be used as a "bridge" until an investor secures permanent financing or is able to pay off the loan in full.
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Hard money loans are short-term loans usually originated by private companies. These loans have higher interest rates than traditional loans, yet a simpler application process.
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Small Business Administration (SBA) loans are government-backed loans used to support a small business entity.The interest rates are generally lower than for other business loans, and they have a long loan term. However, small business loans have stringent requirements; for example, only small businesses with a certain income can apply.
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SBC Loans are commercial property loans designed for smaller commercial real estate transactions. Compared to traditional mortgage loans, these loans offer flexible terms and simpler underwriting requirements. They come in many shapes and sizes, but typically you will see Bank Statement, Light Documentation, and Full Documentation loan programs.
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A non-QM mortgage is a mortgage that fits outside the rules of a qualifying mortgage. This covers many buckets, but in this case we are referring to an investor loan such as Visio’s Rental360 Loan Program. Essentially, these loans are commercial loans for residential properties.
Multifamily properties consist of five or more residential rental units. One example would be a residential high-rise building.
This type of property contains a mix of commercial and residential units. For example, this can be an apartment complex with office space on the ground floor.
A flex space is typically a warehouse with a small office and retail component. Tenants interested in flex spaces may include ecommerce, logistics, or construction companies. The essence of flex space is that it's adaptable and easy to reconfigure.
Some examples are suburban office buildings or buildings in the central business district. Most SBC lenders require the office space to have multiple tenants.
Light industrial properties can attract tenants such as companies that produce food or fast-moving consumer goods. Just like with office space, most SBC lenders require multiple tenants.
Most lenders will shy away from single tenant buildings due to the risk associated with the loss of the tenant (of course this excludes the situation with a credit tenant triple net lease).
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Visio Lending enables small-to-medium investors to grow their portfolios of rental properties, including vacation rentals. Our DSCR Loans are underwritten using property level cash flow, rather than personal income. We're proud to offer:
Long-term financing with full 30-year terms and no balloon payment
The ability to protect your personal assets and finance in an LLC
Prepayment fee and interest rate buy downs
Before investigating commercial real estate loans, you must identify which type of real estate you'd like to purchase, as this will impact what kind of loan you pursue. For investment properties, a DSCR loan is a better choice than other commercial lending options, as it offers a fast loan approval process, minimal personal finance investigation, less stringent loan requirements, and commonsense lending stipulations.
Most commercial lenders, including Visio Lending, require a credit score of at least 680, but this can vary depending on the lender's stipulations. Generally, higher credit scores provide you with better rates. The better your score, the closer your actual interest rate will be to the prime rate that is afforded to the most well-qualified borrower.
One of the benefits of pursuing a DSCR loan is that there is less investigation into your credit history before credit approval, which makes it easier for self-employed borrowers than the traditional lender route. DSCR loans are also good for limited partnerships because, unlike most loans, you can borrow as a business entity rather than an individual.
For commercial real estate loans, you want a loan-to-value ratio of 80% or lower, which means that you will need to provide a down payment of at least 20%. Visio Lending will accept an LTV of up to 80%.
Typically, the minimum property value is $150,000. When it comes to the loan amount, the smallest commercial loan you can generally access is $75,000. The maximum loan amount will depend on the property's type, estimated cash flow, the LTV, and other requirements.
When you rely on Visio Lending for a commercial loan, you benefit from a streamlined process, competitive interest rates, and commonsense borrowing protocols that let you expand your portfolio quickly. Here's a quick overview of what you can expect when you choose us as your commercial real estate loan lender.
As you begin the process for a commercial loan, take stock of your financial situation, such as your credit score, cash reserves, and monthly cash flow, to identify how much you can afford.
Utilizing our mortgage calculator based on current rates and the loan amount you're considering, you can see if you're heading in the right direction in regard to monthly payment sizes. Be sure to factor in closing costs and the down payment when considering your upfront costs. This will help you see how much you can afford, which will help you narrow down your real estate options.
Now that you know the loan amount you can access, it's time to review existing buildings that might meet your needs. Work with a qualified commercial real estate agent to find properties that fit your specifications based on size, location, and rental income, then use our rental income calculators to ascertain how lucrative your options are.
You can also use Visio Lending's DSCR calculator, which will give you a simple ratio that shows how well the property will cover its debts, such as mortgage payments and maintenance. These tools are a critical part of the exploration process before you approach lenders.
When you've identified a good property and ascertained your creditworthiness for a loan, you can begin preparing your documentation. For a DSCR loan, you don't need personal finance information like tax returns, pay stubs, or bank statements: all we require in terms of your own financial circumstances is your credit score.
Most of the documentation a business needs to get a DSCR loan is related to the property, such as lease agreements and an appraisal, which shows whether it is making enough money to finance the loan. You can review all the documentation we need on our FAQ.
You'll then complete the application and submit the necessary documentation. Our process is fast: you can get approval in 21 days or less, which helps you stay competitive in the market. In the meantime, you should carefully review all the loan terms, particularly regarding the amortization period.
Unlike home mortgages, DSCR loans have prepayment penalties: this means that if you pay the loan early, you will need to pay a percentage of the loan amount in addition to your payment. This ensures the lender can recoup the loss of profit they would have made from the interest rate on your payments.
Visio Lending is the nation's premier lender for buy and hold investors offering, long-term loans for SFR rental properties, including vacation rentals.