Commercial loans generally require a down payment of between 20-40%, with some exceptions. Down payment requirements vary significantly due to a variety of factors, including loan use, credit score, borrower history, and more.
Should You Work With A Commercial Mortgage Broker?
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What is a Credit Tenant Lease?
A credit tenant lease, or CTL, is a type of long-term lease in which the tenant's creditworthiness is used as collateral for a commercial real estate loan. The lender, typically a bank, life insurance company, or CMBS lender, agrees to make a loan to the owner of the property leased by the credit tenant. CTLs are often used by major corporations, educational institutions, or government agencies who want to lease space in high-end office buildings or large retail centers. Credit tenant lease terms are typically between 10-15 years.
Depreciation and Accelerated Depreciation in Real Estate
Physical Vacancy vs. Economic Vacancy: What's the Difference?
When determining whether to invest in a commercial property, it’s essential to look at the property’s vacancy rate. There are two major types, or methods, of measuring vacancy; economic vacancy and physical vacancy. Economic vacancy represents the rental loss a property owner experiences due to vacancy over a certain time period, while physical vacancy represents the percentage of units that are vacant over a specific time period.
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What is Cap Rate Spread in Commercial Real Estate?
Cap rate spread is the difference between the cap rate of commercial properties and current interest rates, typically measured by the 10-year Treasury Rate. Cap rate spread is an important indicator of risk, as U.S. Treasury bonds are considered virtually “risk-free,” while real estate investing involves a considerable degree of perceived risk.