Owner-occupied commercial property vs an investment property

Lenders do not treat a building you operate from the same way they treat a building you lease to someone else. Owner-occupied commercial real estate is underwritten on the business. Investment property is underwritten on the rent. Kelly Dutton at OneClick Commercial Funding asks which one you have before she picks a program.

Owner-occupied means the business is the collateral story

If your company will occupy most of the space, the lender reads business tax returns, debt, and how long you have operated. The building still matters, but a strong business can carry a building that would not pencil as a pure rental. This is the lane for many SBA loans.

The SBA 504 program is aimed at owner-occupied real estate and major fixed assets. SBA 7(a) is the more flexible business loan and can include real estate. Kelly’s comparison of the two is in SBA 504 vs 7(a).

Investment property means the rent has to cover the payment

A leased building, an apartment community, or a retail strip you do not occupy is an investment file. Business tax returns matter less than the rent roll and expenses. That is the DSCR conversation, and it lives on the commercial loans side of the site rather than as a residential mortgage.

Partial occupancy is where files get miscategorized. If you use 30 percent and lease the rest, say so with a floor plan. Guessing the percentage is how a file gets submitted to the wrong desk and bounced.

What to bring either way

Use the document checklist. Owner-users should add business returns. Investors should add leases and a trailing twelve-month statement. Kelly is a broker, not a lender, and she does not turn an investment condo or a house into a commercial file. Residential mortgages are a different license and a different person.

What this is not

This is not a commitment to lend. Loan terms, amounts, and rates are not guaranteed. Every file still goes through lender approval, credit review, and underwriting.

About the author

Kelly Dutton is a senior commercial mortgage broker at OneClick Commercial Funding in Phoenix. She arranges financing for business owners and real estate investors. She is a broker, not a lender. Read more on the About Kelly Dutton page.

Next step

Call (480) 363-1412 or visit kelly-dutton.com to request a financing call with Kelly Dutton at OneClick Commercial Funding.