For Loans up to $15,000,000
Commercial buildings are those that are used for commercial purposes. They include office buildings, warehouses, storage units complexes, apartment complexes, and retail buildings (e.g. convenience stores, ‘big box’ stores, and shopping malls). To help you purchase commercial real estate, when you use Texas Property Lending along with its affiliated Texas Property Realty, you can maximize your profits by cutting your overall expenses.
Qualification for a Commercial Loan can vary greatly from Lender to Lender. Although the items below are given, it can be important to contact us so that we can place you with the right Lender, whose requirements can fit your exact situation.
Is not Credit score driven.
Qualification is based on the cash flow of a property, not the individual.
It can be easier to qualify for a Commercial loan than a personal residence loan.
Loans Amounts up to $15,000,000
A Non-Recourse Loan means the Lender cannot sue you if the loan defaults.
Lenders limit the Loan amount to a percentage of the property Value.
For tax advantages, talk to your CPA.
Owning commercial property could accelerate wealth creation and accumulation.
Because the commercial property itself is primarily qualifying for the loan, and the borrower's income is not qualifying the loan, therefore, it can be easier to qualify for a large commercial property than a personal residence; however, it is important to understand the limitations of the commercial lender s mindset.
Although Lenders may pull your credit and want to know your present income, they do not base their commercial lending decisions on any FICO Score or how much your gross yearly income is. Instead, they qualify your loan based on the cash flow of the Commercial property. They want to make sure that the money the property brings in is at least 120% to 125% of your total expenses to run that property. When a Lender turns this number into a ratio of Expenses to Income, they express this as a required ratio of 1.20 to 1.25. This ratio is called your Debt Coverage Ratio. Lenders want to see a sufficiently robust cashflow. If your loan goes delinquent, then it is a proper Debt-Service Coverage Ratio on the property itself that will make sure the Lender is paid, not you. For each type of property, each Lender in the Houston Metro Area sets their own required Debt-Service Coverage Ratio.
Before all else, a commercial Lender wants safety. Lenders know that the real value of commercial property derives from the amount of net cash flow that it produces, not what someone is willing to pay for it. Lenders also know that during an economically challenging time like a recession, your cash flow may decrease below its current level, which means that the future value of your commercial property value can fall. To hedge against this future potential loss of value, commercial Lenders will only loan you an amount that is less than what they feel confident your property is currently worth. The percentage of this lesser loan amount compared to the current value of the property is the Loan to Value (LTV). Typically, Lenders in the Houston Metro Area want to lend no more than 80% of the current estimate of the value of the property; however, for each type of property, each Lender sets their own LTV Criteria.
Unlike residential appraisers, commercial appraisers will often equate the current value of a property to a future projection of net income that the property will likely generate over a period of time in the future. To an appraiser, the ratio between the yearly net operating income produced by an asset and the original capital cost (the price paid to buy the asset) or its current market value is called the Capitalization rate, or the “Cap Rate.” By comparing Cap Rates between similar commercial properties in the Houston area, the appraiser can estimate if you are paying too much for a property; For each type of property, each Lender may use a unique Cap Rate to determine value.
A Non-recourse Commercial Property Loan is secured by the commercial property as collateral, and the borrower is not personally liable. If the borrower defaults, the lender can seize and sell the collateral, but if the collateral sells for less than the debt, the lender cannot seek that deficiency balance from the borrower. Since most commercial real estate is owned in a partnership structure (or a similar pass-through taxable entity), a non-recourse loan allows the real estate owner to not only enjoy the tax benefits of a tax-pass-through partnership structure (that is, loss pass-through and no double taxation), but it also simultaneously limits personal liability to the value of the investment. For each type of property, each Lender in the Houston Metro Area will use their own criteria to establish a Non-Recourse Loan.
Most commercial Lenders do not operate inside completely black and white guidelines. Decisions to fund or not are often made by a Loan Committee. Even if your numbers make sense, a Lender can decline it. It may have nothing to do with your figures or yourself, but have everything to do with other similar types of loans that the lender acquired that have not yet performed well. Sometimes the lender may approve your loan because it wants that type of risk to counterbalance a portfolio of other kinds of loan risks. Depending on what is going on behind the scenes, a Lender may not want your particular type of loan at present. So, instead of declining you, they will give you a high rate, but later, they may want your loan type so that they will provide you with a much better rate. For each type of property loan, each Lender in the Houston Metro Area may have varying appetites at various times. Our philosophy is that for every borrower there is a perfect Lender. Hence, it is vital to use a Commercial Loan Broker like Texas Property Lending to shop for your best rates and terms!
Qualification for a Commercial Loan can vary significantly from source to source. So it is essential to contact us so that we can place you with the right set of requirements for your exact situation. Remember that in many cases, because the commercial property itself is primarily qualifying for the loan, not the borrower’s income, it can be easier to qualify for a large commercial property than a personal residence.
Try our affiliate:
Our loan services at Texas Property Lending, Inc. are available to anyone in Houston or throughout the State of Texas purchasing commercial property. However, you can streamline your commercial property purchase by combining the services of Texas Property Lending, Inc. with our affiliate Texas Property Realty as your real estate broker. Combining these services will help us (Texas Property Lending, Inc.) get you into your dream commercial property, and could also significantly decrease your overall costs. If you’d like to learn more about bundling services from Texas Property Lending and how it could save you money, call now at 713-955-LOAN (5262) or click above.
We endorse the spirit of giving espoused by Bill and Melinda Gates, Warren Buffet, and others, in helping to reduce global inequality and human suffering. Each time you close a transaction with either affiliated business, Texas Property Lending Inc or Texas Property Realty, we donate 10% of earned Commissions to Charity. With each of your particular transactions, ask us for details!
-Bill and Melinda Gates
Texas Property Lending is an Equal Housing Lender. As prohibited by federal law, we do not engage in business practices that discriminate on the basis of race, color, religion, national origin, sex, marital status, age, because all or part of your income may be derived from any public assistance program, or because you have, in good faith, exercised any right under the Consumer Credit Protection Act. Disclaimer: Programs subject to change without notice. All borrowers must qualify per program guidelines.