This section will talk about Owner-occupied commercial real estate – also known as owner-user commercial real estate. (For investment properties- Click here) The owner must occupy more than half—51% or more—of the building’s leasable space for the purposes of running their own business. A business that has the same ownership as a holding company that owns the property is also considered owner-occupied.
Asset types that qualify for owner-occupied financing include industrial buildings, flex, retail, office properties, and professional medical offices. Special-use properties such as self-storage, assisted living facilities/skilled nursing facilities and other healthcare properties, day care, and event centers also qualify. A multifamily property is not eligible for owner-occupied financing, but mixed-use buildings and hotels do qualify.
How much of a down payment do I need:
SBA provides as low as 10% down payment and conventional is about 20-25%. This does need to be in cash ready to be used. Banks generally don’t like borrowed down payments.
Do I need to occupy the entire building?
No, but you do need to occupy at least 51% and you can rent out the rest. Anything where you cant occupies over 51% then is considered an investment property. Generally, banks will want to see that the business can afford the entire loan payment without any rental income from a tenant.
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