Hello, everyone and welcome back to a new video shawn's, a name and today i want to talk about my experience of buying my first ever commercial real estate building. Now, while i've closed hundreds and hundreds of residential real estate transactions, i've never actually closed a commercial transaction until a couple days ago, and the differences between the two are so different and there's almost no information out there on commercial. Which is why i wanted to share my experiences today, and this is a little bit of a different video than what i normally do. I am actually headed over to the building, because i do want to show you a little walkthrough of the building that i did buy and i want to talk about kind of the differences, mainly in the financing aspect of it on our way over there, because it's Definitely unique and i feel like it's worth sharing, i might be a little biased since i am a mortgage lender but, in my opinion, any sort of real estate acquisition.

The most important aspect is the financing aspect, because if you can't buy something, who cares what you're buying right but there's four main differences with being able to purchase a commercial building when it comes to financing and the most prominent or i guess, well-known one is the Fact that to buy a commercial real estate building your down payment is going to have to be a lot bigger than it would on a residential purchase because on a residential purchase you could kind of home hack your way into buying real estate. You could occupy it as a primary residence and put as little as three to three and a half percent down. You could even do a down payment assistance program get in for no money down. So there's a lot of ways to acquire residential real estate very easily.

With very little money down now on the commercial side of things, even if you plan on occupying a property and you're going to own or occupy it, which is the building that i bought you're, still having to put down a good chunk of money. Most traditional commercial lenders are going to want anywhere between 30 to 35 percent down. You can do it in some cases with a little bit less down, but it's a lot more challenging and not only that, but the price of a commercial building is typically a lot more than a residential building. So if you're looking at percentages and go okay, i need to put down thirty percent on a one million dollar building or hey.

I need to put down three percent on a three hundred thousand dollar building very different. Ultimately, you got ta have a lot of cash. All right and um i actually was able to get in with putting eighteen percent down i'll. Tell you how i was able to do that after i go through these other topics, but i i got in with 18 down.

I bought the building for a million fifty um, so you can kind of do the math on how much that was in just my down payment, not including my closing costs, but you need a lot of cash to put down now. The second thing is the property type, so, when you're buying a residential building you're buying a building that people live in, that's all people do with it right, they're going to live in that building, whether it's a condo town, home, single-family, residence manufactured home, whatever it is, Someone's going to be living in that building when you're buying commercial, it's different, the use of a commercial building solely depends on what kind of building that it is right. If you're buying a gas station versus a warehouse versus an office building versus a multi-unit like big condo association or something right, there's so many different types of properties that you have to kind of work backwards. When you're buying a commercial property and really hone in on what property type you want, because the financing is going to vary tremendously around that, for example, not a lot of lenders like to lend on anything related to the auto industry, whether it's a garage like mechanic Shop or some other sort of auto industry you're going to find a lot harder time getting lending on that.

Just because it's just kind of a less desirable property type and kind of the way that they're usually treated, then. The third thing is the actual type of loan that you're getting now when you're buying a residential home. It's 99 of mortgages that are done are going to be on a 30-year fixed rate mortgage very simple, very easy. Your principal and interest payment are not going to change for the next 30 years or 360 months.

Right now, on the commercial side, that's very hard to find a 30-year fixed rate mortgage. It almost doesn't exist. Typically, what you'll see is either a 15-year fixed rate mortgage or, what's i guess more popular - is a whole bunch of either arms, adjustable rate, mortgages or you'll see things like hey it's going to be a 15-year term, but a 25-year amortization schedule, which means that your Payments are based on 25 years, but that your term is only as good as 15 years. So that means that other 10-year difference is going to be due in a balloon payment at the end of those 15 years.

So the type of loans are very, very, very different and i've seen some super unique ones. Maybe some interest onlys um, you know there's not a whole lot of regulations when it comes to types of loans in the commercial world, so they can be a little bit ugly. A lot of them come with prepayment penalties, that's kind of normal, so all of that gets kind of factored in. I was actually able to secure a 25-year fixed-rate mortgage.

I was going for the longest term fixed-rate mortgage that i could get just because of how low interest rates are right now, obviously, you know it'll depend on the property type and that's why the loan programs will vary. So much is property types come in and out of the market. If you look right now, shopping malls aren't the most popular types of commercial buildings. Yet a warehouse is super popular and they're red hot right now the industry will ultimately change based on the property type that you're getting um, and that's why a lot of lenders will give unique loan terms, because you might only be in a building for 10 years Right, you might only have use for it for 10 years and then you'll kind of plan a loan program.

Accordingly, this is supposed to be sunny arizona, and it's so hard to see in front of me right now, but the last thing i want to talk about the number four thing: that's a little bit different on a commercial building acquisition is the fact that most lenders Are going to want to see some sort of experience of you already owning commercial real estate to be approved for your loan? So that's the kind of catch 22 of well. I want to buy commercial real estate, but i need experience owning commercial real estate to buy the commercial real estate. So how does that happen most of the time? This is pretty much solved by partnering up with someone who's already owned commercial real estate. So someone who has a resume of owning one, two, three four five buildings will partner up with a new investor who will bring in funds and kind of do the deal together now that that's the most common way of doing it versus on the residential side? You don't need any experience.

In fact, you actually get a little bit more benefits if you don't have experience, so that's a big difference between rezzy and commerce. Luckily, for me, i didn't need a partner, because again i went with a unique loan program that didn't really require me to have any sort of commercial real estate experience, but i still do have residential real estate experience, which is what some lenders will at least want To see at the very minimum when you do go to buy a commercial real estate building now, when it comes to my specific loan um, i actually did not do the route of a normal loan like i was just saying right, i put 18 down. I got. What's called an sba loan, a small business association loan, because i had the loan underwritten off of my new company - that's going to be occupying the building x2 mortgage.

You should check it out online x2mortgage.com, but i was buying a building that i wanted to occupy. For my new mortgage company and so a i got an sba loan basically to allow for very little down, so i could put more money into actually building the company up um and it's more so structured as a small business loan. That's secured by a commercial real estate building, so that was the really cool thing, because i got to basically get into the building with very little down in terms of commercial, very little down, which puts a lot more cash in my pocket. Now i was originally planning on putting like 30 down, but when i realized i can put a lot less down.

It was great when i realized i didn't need a partner, it was great and you know our property type, which i'm going to be showing. You is actually a flex space, half warehouse off office that was actually the biggest hurdle in the entire. I guess process was just getting approved for a unique type of building for the use that i'm going to be using it for, but we got past that hurdle closed, everything's good. So if you're thinking about buying commercial real estate i'll give you kind of like a quick synopsis, just plan on putting down a lot more money than that than what you'd expect right.

You need a lot more liquid cash, because not only is your down payment bigger, but your appraisal is expensive. The appraisal was like five grand. You got an expensive appraisal. Um.

You got an expensive inspection, environmental cert. All those things i mean your closing costs in general, like when you're in the commercial world, it's it's the big boy league and you're, not just spending your typical. You know 10 grand in closing costs no you're spending far more in that just to get to the closing table. So you definitely want to have a lot more cash saved up.

You want to have some sort of experience owning real estate, hopefully commercial, real estate, if possible, um and then, on top of both those things right. You just want to be careful with the loan program that you're actually getting new for the building type that you're buying to make sure it actually makes sense for the use you're going to have for it. But it's exciting stuff: when you're able to buy some commercial real estate, all right we are, we are pulling into the building now. So i am going to do a couple things at the building.

First and then i will show you a little walk-through tour of it and yeah it'll be fun boom um fairly large building. I guess it's not that one! It's just this guy right here and we'll walk in all right, so this building is going to be getting a lot of work um. But right as you walk in you've got yourself. You know a little um kind of front desk area.

You can see kind of an ugly kitchen right there um and then we've got a little conference room in here. Um warehouse is gon na be in the back i'll show you that in a second over here, um just got some nice little office areas. This is a two-story commercial building, um, which we'll go up in a sec office. Let's go in the warehouse bathroom.

The cool part about this building is the fact that it is a flex space kind of building. So it's you know, half office back that way. Um and also half warehouse, which is this right here - um semi, is not included with the building that is leaving in a couple days um, but we got a massive warehouse, um kind of space in the back to do whatever you need to do back here. So we'll be kind of using the space, probably to fix that we'll be kind of using the space in a unique way.

I'm really excited for the the plans we have for this place, but i do want to show you the upstairs really quick, all right. Lots of work is going to be happening up here. We've got kind of an open office area in here, there'll be just a bunch of desk space um and all that good stuff window out to the front right here that wall is coming down. We've got a little office space.

This is kind of glassed in um. Those two walls are coming down. We're gon na do some glass offices along there and then you've got a nice little outlook from here with all of this kind of open desk space. So the cool thing about this building is, you can use it for pretty much anything um and i guess my goal with it with buying.

It is going to be to fully renovate it and bring it kind of to the 21st century. We're talking flooring, we're talking. Walls, we're talking fixtures, we're talking furniture pretty much. Everything in here is going to be a complete new and redesigned look and i'm excited to kind of show you what it's going to look like afterwards, i'm doing a very brief kind of simple walk through right now.

Just to give you an idea, i'm going to do a more kind of formal here's, the before here's, our specific plans that we have for the building and then kind of an after of what it all ends up. Looking like, if you've seen the project, i did on the residential duplex pro property that i own um, you'll kind of get an idea of what you can expect on this channel. So if you haven't subscribed already, you definitely should but yeah, i'm excited that's pretty much. It for this building i mean there's gon na, be a lot of stuff.

That's going down. I can't wait to bring you guys along for the ride. Hopefully, you guys are interested in seeing a lot of this stuff um if you've been thinking about kind of buying a commercial building or maybe some hurdles you run into or maybe have any questions about it. While we don't land on commercial buildings, yet um, i did kind of learn a lot and would be happy to share any info that i have learned so drop me a comment down below.

If you like, a little bit of insight, a little bit of guidance. Definitely a beast but hopefully worth it, but i ultimately hope you guys learned something new with this video. If you did please hit that like button, it really means a lot to me if you can hit that like button subscribe, if you're new around here um. Otherwise, i'm gon na take this bad boy for a joyride, since it is in my building now and i'll see you guys in the next one you.