Net operating income
Income after operating expenses, before debt service. Lenders test how comfortably it covers the payment, which sets both the maximum loan and the pricing.
Property that earns its own financing.
Once a building has five or more units, or its use turns commercial, it stops being underwritten like a house. The property’s income becomes the centre of the file, and the rules change accordingly.
How commercial underwriting differs.
Residential lending is largely about the borrower. Commercial lending is largely about the asset: what it earns, what it costs to run, and what is left to service debt. Lenders look at net operating income and how comfortably it covers the payment, alongside the quality and stability of the tenancy.
Terms look different too. Commercial loans frequently carry shorter terms than the amortization schedule, meaning a balloon payment or a required refinance at maturity. Knowing that date, and planning for it, is part of the deal rather than a surprise at the end.
- Apartment buildings of five units and above
- Mixed-use property with residential and commercial space
- Retail, office, and light industrial
- Owner-occupied business premises
- Purchase, refinance, and cash-out
The rent roll is the application
For income property, the operating statement and rent roll do more work than anything else in the file. Accurate, current, well-organised figures will move a commercial loan faster than almost anything else you can control.
What lenders underwrite.
Commercial files turn on the property, the income, and the sponsor — in that order.
The tenancy
Occupancy, lease terms, and tenant quality. A building with staggered, stable leases underwrites very differently from one with everything expiring at once.
The sponsor
Your experience owning and operating similar property, plus liquidity and net worth. It matters, but it rarely overrides weak property numbers.
Where residential ends and commercial begins.
The line is unit count and use. One to four residential units is residential lending, even as an investment — which usually means better terms, longer fixed periods, and simpler paperwork, and often points to a DSCR loan. Five units and up, or a genuinely commercial use, moves you into commercial underwriting. If you are choosing between a fourplex and a six-unit, that decision affects your financing more than most buyers expect, and it is worth modelling both before you commit.
What we will ask you for
What we will ask you for
- Current rent roll and 2 years of operating statements
- The purchase contract, or existing loan statement for a refinance
- Property photos and any recent appraisal or environmental report
- Entity documents for the ownership structure
- Personal financial statement and schedule of real estate owned
- Copies of the leases in place
Common questions.
How much do I need to put down?
Commercial generally requires more equity than residential, and the exact figure depends on the property type, the income, and the lender. Stabilised multifamily is typically treated more favourably than special-use commercial. Send us the numbers and we will tell you where the deal lands.
Can I borrow through an LLC?
Yes — entity ownership is standard in commercial lending rather than an exception. Most lenders will still want personal guarantees from the principals, and will underwrite them.
What is a balloon payment?
It is when the loan term is shorter than the payment schedule, so a large balance remains due at maturity. Commercial loans commonly work this way. It is manageable if you plan for it — but you should know the maturity date before you sign, and have a route to refinance or sell before it arrives.
Do you finance mixed-use property?
Yes. Mixed-use is common in Los Angeles and how it is underwritten depends on the split between residential and commercial space. That ratio can change which lenders will look at it, so tell us the breakdown early.
Is the process slower than residential?
Generally yes. There is more due diligence — leases, operating history, sometimes environmental review — and third-party reports take time. Build a realistic timeline into your offer rather than assuming a residential schedule.
Send us the rent roll.
With the operating statements and the property details, we can tell you quickly what the income supports and which lenders fit the deal.