What Is Your Thought On Length Of Mortgage For Commercial Props?
I have one commercial investment so far (an office/warehouse complex) that I bought 2 years ago. It's a solid property in a good location and the pricing was such that I can have it paid off in total in 11 years. After looking through some of these forums I see most people feel you should take out 30 year notes on props and be in for the cash flow only......never seeming to build up any equity.
I'm curious what your thoughts are when buying a commercial property. I know it will depend on the property, but in general do you try to pay it off as soon as you can or are you in it for the cash flow only and you drag out the mortgage as long as possible.
Thank you
I would definately take 30 year term. I would rather pay less in monthly payment, so I could invest in more properties. If you have 10 year term, your debt to income ratio will be raised up.
The answer to your question is based on your overall objective. It comes down to one of two choices. Option A: Do you want the "cash flow" to fund a lifestyle, other debt service or for any other reason. Option B: Do you genuinely want to build wealth? The two different methods are approached completely different. I can spend hours talking to you about the subject in great detail. My background in investment banking and private client banking provided me insight on the "application" of building wealth. When it comes down to it, do you want the cash now for what ever reason, or do you want to build wealth to pass on to whom ever?
Respectfully,
Phil
Phillip Herrejon
312.375.7132
Do lenders make commercial loans on investment grade properties with amortizations longer than 15 years?
I have only talked to two commercial lenders and both wanted 15 year amortizations with a 5 year balloon.
Yes they do.
The term "commercial" covers allot of ground when it comes to real estate. It is kind of like saying "attorney" - what kind?
If you have a particular type of property / opportunity / objective in mind, please contact me and we can discuss this in greater detail.
Respectfully,
Phil
Phillip Herrejon
President of the Chicago Real Estate Investment Club
Investment Property Finance Consultant
312.375.7132
**Please See My Profile**
I think you have to decide what your short-term and long-term goals are. Money now vs. money later. Do you want to retire with it or do you leverage it to buy more property now. Can you hold and still invest more?
I prefer 30 year.
I can pay it off in 10 or 15 if I want to, but if I get into a financial pinch, I can drop back to the minimum payment. A 15 year Am doesn't allow you that kind of flexibility.