What is the difference between a residential and commercial investment property? You will need to know this because this will determine who you will approach to do your investment property mortgage. A commercial lender provides financing for multifamily of 5 units or more, and other properties like office buildings, mixed use buildings etc. and is typically zoned commercial. While a residential lender specializing in investment property loans finances a property that has 5 units or less. Because of the differences in the purposes of these two loans, you will also notice their structures also differs. Basic areas of difference include these:
• Loan size–Commercial loans tend to be larger since commercial properties are typically more expensive than personal residences.
• Credit requirements–Typically, a commercial investment property must show the ability to cash flow, have a good occupancy rate and good credit is used to determine eligibility. A residential loan requires good PERSONAL credit and income.
• Terms–Commercial loans typically have a 5 to 10 year terms and amortized over a 20 year period.
Wishing You the Best,