Commercial Loan Types for Foreign Investors
Commercial real estate is often what real estate investors graduate to after their experience with residential investing. With commercial property, the value of a property is strictly related to the income production capacity of the property, not any intrinsic value like in residential property. If you raise the rents of a building, you raise the value of a property.
Loan Qualification Parameters
30-50%
down payment
Net worth
requirements
Liquid asset
requirements
Operating Partner
Recourse
Multifamily Loans
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Loan amounts: $500K – $50M
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5-25 unit properties
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40-75% LTV
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Interest rates: 5-10%
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Capitalization Rates determine Interest Rates
Triple Net (NNN) Loans
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Long-term leased properties
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Tenant covers taxes, insurance, maintenance
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Lower risk profile
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20-25 year terms
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Rates: 5-7%
Retail Property Loans
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Standalone and multi-tenant properties
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Loan amounts: $250K – $10M
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65-70% LTV
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Tenant credit score important
Hotel/Condotel Loans
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Occupancy rates critical
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Higher risk assessment
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Rates: 7-10%
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Shorter terms (5-10 years)
Mixed-Use Property Loans
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Combines residential/commercial spaces
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Comprehensive property evaluation
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More complex underwriting
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Flexible loan structures
Industrial/ Warehouse Loans
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Logistics, manufacturing, storage properties
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Long-term lease preferences
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50-65% LTV
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Strong tenant credit required
Medical Facility Loans
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Healthcare-specific financing
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Long-term, stable investments
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Lower default risk
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Specialized property assessment
Bridge Loan Specifics
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Short-term (6-24 months)
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Quick property acquisition.
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Higher interest rates (9-13%)
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Exit strategy requirement.
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Use these loans to acquire and rehab, then rent property.
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Once rented at market rates, refinance to property specific long term loan.
Key Documentation
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Passport
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Bank statements
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Property appraisal
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Business plan
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Entity Documentation
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Personal financial statement
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Operating Agreement
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Cash Flow statement, Balance Sheet
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Offering Memorandum
Risk Mitigation Strategies
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Comprehensive property valuation
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Tenant credit assessment
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Due Diligence
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Demonstrated investment experience
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Clear exit strategy
Foreign National Considerations
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Higher Down Payments: Foreign investors typically face higher down payment requirements compared to US residents. This is because lenders see foreign nationals as a higher risk due to limitations of recourse.
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Credit History: Foreign nationals may not have a US credit score, so lenders often look at international credit reports or may assess based on their financial standing abroad. It is a good idea to establish credit in America, a task Nonresident Investor helps with.
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US Entity Setup: All lenders require foreign nationals to form a US-based entity to simplify the lending process and avoid complications from international tax laws.
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Additional Collateral: In some cases, foreign nationals may need to provide extra collateral and sign personal guarantees to secure a loan.
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Property Management: Some types of commercial property require high levels of management, while others require very little. Types that require very little management are Triple Net properties, and Retail properties. Types that require large management responsibility are hotels and Mixed-Used properties.
Banks
