Investment Property Financing
Two Investment Structures
Commercial real estate loans generally fall into two main investment structures: commercial investment loan financing for larger assets and DSCR-based rental loans for smaller residential portfolios.
Commercial Investment Loans
Rates: 6.5–8.75%
Term: Up to 25–30 years
Down payment: Typically 25–35%
Closing: 30–75 days
Property types: Office, Industrial, Multifamily (5+), Mixed-use
Best Fit When
Designed for stabilized, income-producing commercial real estate properties.
Residential DSCR Loans (1–4 Units)
Based on rental income (DSCR required)
Term: 20–30 years
Rates: Similar to commercial investment
Down payment: 20–25%
Personal guarantee usually required
Prepayment penalties common
Best Fit When
Financing based on property cash flow — not personal income.
Commercial Investment vs Residential DSCR
COMPARISON
Use this comparison to understand whether a commercial investment loan or a residential DSCR loan better fits your property type, leverage, and qualification profile.
Category
Commercial Investment
Residential DSCR
Property Type
Office, industrial, multifamily (5+), mixed-use
1–4 unit rental properties
Units
Typically 5+ units
1–4 units
Down Payment
25%–35%+
10%–25%
Term
Up to 25–30 years
20–30 years
Personal Guarantee
Often required (20%+ owners)
Usually required
Closing Timeline
30–75 days
30–75 days
Property Types Financed
Financing Across Property Classes
A commercial property loan can be used across multiple income-producing asset classes, depending on occupancy, property stability, and lender fit.
Multifamily (5+ Units)
Office Buildings
Industrial / Warehouse
Mixed-Use Properties
Apartment Portfolios
Retail (Selective)
Commercial Investment Loan Snapshot
Overview
These are the core commercial investment loan features lenders review, including amortization, DSCR, stabilization, appraisal, and guarantee requirements.
20–30 Year Amortization
Long-term repayment schedules that reduce monthly payments and improve cash flow.
Balloon Options Available
Shorter loan terms (5–10 years) on a longer amortization schedule, with a balloon due at maturity that is refinanced or paid off.
Stabilized Property Required
Property must have consistent occupancy and rental income history (typically 85–90%+ occupancy).
Income Covers the Payment
Net operating income must exceed annual debt service by at least 20% to qualify.
Professional Appraisal Required
Independent property valuation ordered by lender to verify market value and condition.
Personal Guarantee Often Required
Borrowers with 20%+ ownership typically provide personal guarantees for recourse loans.
HOW LENDERS EVALUATE CRE DEALS
The Three Metrics That Determine Your Loan
CRE lenders size loans using three primary metrics. Your loan amount will be the lowest amount calculated by these three constraints. Understanding them puts you in control of the conversation. For a worked example of all three on one building, see investment property loan sizing.
Debt Service Coverage Ratio
NOI ÷ Annual Debt Service. Measures whether the property’s income can cover mortgage payments. Most lenders require 1.20x–1.25x minimum. Higher DSCR = better rates.
Loan-to-Value Ratio
Loan Amount ÷ Appraised Value. Measures leverage risk. Conventional CRE maxes at 75–80%. SBA goes to 90%. Lower LTV = better terms for you.
Debt Yield
NOI ÷ Loan Amount. The return the lender would earn if they foreclosed. CMBS and institutional lenders require 8–10%+. Increasingly the primary sizing constraint.
Net Operating Income
Gross Revenue – Operating Expenses (excluding debt service). The foundation metric that feeds DSCR, cap rate, and debt yield. Accurate NOI projection is everything.
Capitalization Rate
NOI ÷ Property Value. Used to determine the property’s value relative to its income. Lower cap rates = higher values. Varies dramatically by property type and market.
Loan-to-Cost
Loan Amount ÷ Total Project Cost. Used for construction and value-add deals where appraised value isn’t yet established. Typically 70–90% depending on project type.
Run these numbers yourself with our free calculators: DSCR Calculator · LTV Calculator · NOI Calculator · Cap Rate Calculator · Debt Yield Calculator
Key Terms to Know
Terms
These are the most important commercial real estate loan terms to understand before comparing offers or starting underwriting.
Loan-to-Value (LTV)
The ratio of the loan amount to the appraised property value. Commercial loans typically allow 65–75% (80% multifamily) LTV, while DSCR loans go up to Up to 75–80% LTV.
Amortization Period
The timeframe over which the loan is fully repaid. Commercial loans often use 25-30 year amortization, even if the term is shorter (balloon structure).
Personal Guarantee
Borrower's personal commitment to repay the loan if the property cannot. Typically required from owners with 20%+ equity stake in the borrowing entity.
Stabilized Property
A property with consistent occupancy (typically 85–90%+) and rental income history. Most commercial lenders require properties to be stabilized, not in lease-up or heavy renovation.
Quick Summary
What Is a Commercial Investment Loan?
A commercial investment loan is a type of commercial real estate loan used to acquire or refinance income-producing property.
How It's Evaluated
Property income, Operating expenses , Net operating income (NOI)
Common Use Cases
Acquiring rental portfolios, Refinancing stabilized assets, Cash-out for expansion
Not Included
Primary residence loans, Owner-occupied home mortgages
Types of Commercial Real Estate Loans
Types of CRE LOANS
These are the main types of commercial real estate loans used across stabilized, rental, transitional, and portfolio-based investment properties.
Commercial Investment Mortgage
Long-term financing (25-30 years) for stabilized commercial properties. Fixed or adjustable rates, typically 65-75% LTV, requires DSCR 1.20x+. Best for office, industrial, multifamily (5+ units).
DSCR Rental Loan (1–4 Units)
Residential investment property loans qualified on rental income, not personal income. Terms up to 30 years, 20–25% down payment, DSCR-based approval. Ideal for individual rental properties and small portfolios.
Portfolio Loans
Single loan secured by multiple properties, simplifying financing for investors with several assets. Streamlined underwriting, cross-collateralization, bulk acquisition or refinancing.
Bridge Loans (Short-Term)
Temporary financing (12–36 mo) for properties in transition—renovation, lease-up, or pending sale. Higher rates, interest-only payments, exit strategy required. Not for long-term hold.
Qualification Requirements
Commercial real estate loan requirements vary by asset type, but most lenders focus on down payment, DSCR, property stability, liquidity, and borrower strength.
Commercial Investment
25–35% down payment
DSCR 1.20x+
Stabilized property
Strong liquidity
Professional appraisal
Residential DSCR
10%+ down payment
DSCR qualification
Rental history preferred
Personal guarantee
Credit review required
How to Get a Commercial Real Estate Loan
HOW IT WORKS
From initial property review to final closing, this is the standard process for getting a commercial real estate loan on an investment property.
1
Initial Property Review
Submit property details, rent roll, operating statements, and purchase agreement. We evaluate viability and lender fit.
2
Financial Analysis (DSCR)
Underwriters analyze net operating income, debt service coverage ratio, and borrower creditworthiness.
3
Term Sheet Issued
Receive preliminary loan terms—rate, LTV, amortization, prepayment structure. Review and accept to proceed.
4
Appraisal & Underwriting
Professional appraisal ordered, environmental review conducted, title search completed. Full underwriting finalized.
5
Funding
Final docs signed, conditions cleared, funds disbursed at closing. Title and insurance finalized.
10 CRE LOAN TYPES COMPARED
Find the Right Financing Structure for Your Deal
Each loan type is designed for a specific scenario. Match your property type, timeline, and investment strategy to the right product.
Conventional Bank Loan
Typical ranges, updated September 2026. Your terms depend on the property, the borrower and the lender.
Free tools
Run the numbers
The same metrics a lender checks — free, instant, no signup. Each result links straight into an application.
- Commercial Mortgage Calculator Estimate your monthly CRE loan payment, total interest cost, and full amortization schedule. Compare loan structures before you apply.
- DSCR Calculator Calculate your Debt Service Coverage Ratio instantly. See if your property qualifies for CRE financing and which loan programs are available to you.
- Cap Rate Calculator Calculate capitalization rate, estimate property value from NOI, or find the NOI needed to hit your target cap rate. The essential CRE investment metric.
FAQ
Frequently asked questions
What exactly is a commercial real estate loan and how does it differ from a residential mortgage?
A commercial real estate (CRE) loan finances income-producing or business-use properties — office buildings, retail centers, apartment complexes (5+ units), warehouses, hotels, and more. Unlike residential mortgages, CRE loans are underwritten primarily on the property's income (measured by DSCR), not just the borrower's personal income. Key structural differences: CRE loans have shorter terms (5–10 years) but longer amortization periods (20–30 yr), often resulting in a balloon payment at term end. Down payments run 20–35% vs. 3–20% for residential. Approval typically takes 30–60 days.
What types of properties qualify for commercial real estate financing?
Eligible property types include: multifamily (5+ residential units), office buildings (Class A, B, and C), retail (strip centers, single-tenant, anchored), industrial and warehouse, hospitality (hotels, motels), self-storage facilities, medical and dental offices, mixed-use (commercial + residential), special-purpose (car washes, gas stations, auto dealerships), and raw land for development. SBA programs favor owner-occupied properties; conventional and CMBS favor investor properties.
What is DSCR and why does it matter more than my credit score?
DSCR (Debt Service Coverage Ratio) measures whether a property generates enough income to cover its loan payments. Formula: Annual Net Operating Income (NOI) ÷ Annual Debt Service. A DSCR of 1.25x means the property earns 25% more than its debt payments. Most lenders require 1.20–1.25x minimum. If a property generates $12,500/month NOI and the loan payment is $10,000, the DSCR is 1.25x (meets the usual minimum). If the DSCR is below 1.0x, the property is losing money, and financing becomes difficult regardless of your credit score.
How much down payment is required for a commercial real estate loan?
Down payment requirements by loan type: SBA 504 (Owner-Occupied): 10–15% down (lowest option). SBA 7(a): 10–20% down. Conventional Commercial: 20–35% down. Bridge / Hard Money: 25–40% down. CMBS/Conduit: 25–35% down. Beyond the down payment, budget for closing costs (2–5%) and 6–12 months of liquidity reserves post-closing.
What is the difference between a balloon payment and full amortization in commercial loans?
Most commercial loans have a mismatch between amortization (how payments are calculated) and term (when the loan must be paid off). Example: A loan with 25-year amortization and 10-year term has monthly payments calculated as if you had 25 years, but the remaining balance becomes due as a 'balloon payment' at year 10. This forces a refinance or sale. The SBA portion of a 504 and most 7(a) real-estate loans fully amortize (no balloon); a 504’s bank first lien can still carry one. Always confirm whether your loan has a balloon and plan your exit strategy.
How long does it take to get approved and funded for a commercial real estate loan?
Timeline varies significantly by loan type: Conventional Bank: 30–45 days. SBA 7(a): 30–60 days. SBA 504: 60–90 days. Bridge Loans: 2–4 weeks. Hard Money: 5–15 days. The main timeline drivers are the appraisal (10–21 days), environmental Phase I assessment (1–2 weeks), and title search. Submit a complete package on day one to shave weeks off the process.
What credit score do I need for a CRE loan?
Most bank and SBA lenders want 680+ FICO. CMBS lenders focus more on the property than the borrower. Bridge lenders often want 640+; hard money lenders may accept 620+. For the best rates across all products, aim for 700+ with clean credit history.
What is the difference between recourse and non-recourse?
A recourse loan means you’re personally liable if the loan defaults. A non-recourse loan limits the lender’s recovery to the property itself. CMBS, agency, and some portfolio loans offer non-recourse. Bank loans are typically full recourse. Non-recourse comes with slightly higher rates but significant liability protection.
Can I get a commercial loan for a property I don’t occupy?
Yes. Investment property loans (conventional, CMBS, DSCR) don’t require owner occupancy. SBA loans (504 and 7a) require 51%+ owner occupancy. Choose your program based on whether you’re an owner-occupant or investor.
How do I choose the right CRE loan type?
Start with your property type and investment strategy. Owner-occupied? SBA 504 or 7(a). Stabilized investment? CMBS or bank. Transitional? Bridge. Construction? Construction loan. Multiple properties? Blanket loan. Not sure? Our advisors compare all options for your specific deal at no cost.
Related on BestLoanUSA
Related financing
All loans →- Investment Property An investment property loan finances a building you own to rent out — multifamily, retail, office, industrial or mixed-use — and is underwritten mainly on the property’s income. Bank, DSCR, CMBS and agency lenders typically lend up to 75–80% of value at about 6.5–8.75%. Investment propertyCMBS
- CRE Refinancing A commercial real estate refinance replaces your existing mortgage with a new loan — to lower the rate, replace a maturing balloon, move from floating to fixed, or take cash out. To refinance, check your current loan’s maturity and prepayment penalty, get the property appraised, show that its net operating income covers the new payment at the lender’s minimum DSCR, compare term sheets and close — the new lender pays off the old loan, usually in 30–60 days. Bank, SBA 504, CMBS and DSCR lenders price refinances at about 6.25–8.75%. CMBSRefinancing
- CMBS Loans A CMBS loan (conduit loan) is a fixed-rate commercial mortgage that a lender pools with others and sells to bond investors. It suits stabilized office, retail, industrial, multifamily and hotel properties from about $2M, with 5–10 yr terms, up to 75% LTV, and no personal recourse beyond a carve-out guaranty. CMBSRecourse & guarantees
- Mixed-Use A mixed-use property loan finances a building that combines commercial space — usually ground-floor retail or office — with residential units above. Lenders underwrite both income streams; bank and DSCR loans go up to about 80% of value, and an owner-occupant may qualify for SBA. Mixed-useMultifamily
Guides & articles
All articles →- Commercial Real Estate Loans for Investors vs. Residential How commercial real estate loans differ from residential mortgages — underwriting on property income, loan types, terms and the lenders involved. Investment propertyMultifamily
- The 2026 CRE Maturity Wall: Refinancing a Loan That Comes Due $875 billion of commercial mortgages are scheduled to mature in 2026. How to size the gap when a low-rate loan refinances at today’s rates, and how to close it. MultifamilyRefinancing
- Commercial Real Estate Refinancing: When and How to Qualify When refinancing a commercial mortgage makes sense, your options before a balloon comes due, and what lenders need to approve the new loan. Investment propertyBalloon payment
Glossary
All terms →More calculators
All calculators →- LTC Calculator Calculate Loan-to-Cost ratio for construction, renovation, and value-add projects. See maximum financing based on total project cost including land, hard costs, and soft costs. Loan-to-cost
- Price Per Unit Calculator Calculate per-unit pricing for multifamily properties. Compare apartment buildings on a per-door basis and estimate property value from target per-unit pricing. Multifamily