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Owner Occupied Loans

Owner Occupied LoansMoving your company into a new building, or expanding at your current location? Have you decided to stop paying rent and move your medical, law, or other professional practice into a building of your own? If any of these situations fit with what you are currently contemplating, please pick up the phone and call us as our experience will help you find the right owner occupied loan for your big move.

The rewards of owning commercial real estate can be significant. MidCap will work with you to determine if buying commercial property is the right decision for your business and provide the best financing options for your needs, be it a conventional owner occupied loan at a commercial bank or one backed by the Small Business Administration (SBA).

What are Owner Occupied Loans

Owner occupied loans, by definition, are loans backed by commercial real estate in which 51% or more of the building will be occupied by your business. There are many differences between owner occupied commercial real estate loans and loans for “investment” deemed commercial real estate properties. Investment properties are where you have third-party tenants occupying the facility or where your operating entity uses less than 51% of the total square footage of the property. When underwriting an owner occupied loan, most financial institutions look closely at cash flow to determine whether, or not, to extend a loan. When a bank looks at an owner occupied facility, the cash flow and financial ratios come from the operating entity (your business) and the rent is not a large factor in the underwriting of the owner occupied loan. The opposite is true for investment properties, where the cash flow is first determined by the rents and if those rents can cover the debt service on that particular property.

Owner occupied loans generally have more flexibility on the terms, where investment deemed properties usually match up the term to the average maturity date on the leases. Every financial institution is different on their underwriting guidelines when it comes to owner occupied loans. It is important to understand the structures available to you, along with the different options. MidCap has extensive experience in this area and is ready to assist you in the process.