Investing in commercial real estate (CRE) is one of the most effective ways to build wealth. However, securing the financing for an office building, retail center, or multifamily complex is significantly more complex than getting a home mortgage.
At Nexa Capital Solutions LLC, we specialize in simplifying the CRE lending process. Here is a step-by-step guide to help you secure the funding you need for your next acquisition.
Step 1: Determine Your Needs
Before you approach a lender, you need to know exactly what you're looking for. Are you buying an existing building with tenants? Are you planning a ground-up development? Or are you refinancing an existing property to pull out cash?
Different loan programs (like SBA 504, bridge loans, or conventional commercial mortgages) are designed for different purposes.
Step 2: Assess Your Financial Health
Lenders will look at two main things: the property's income potential and your personal financial strength. Key metrics include:
- Debt Service Coverage Ratio (DSCR): This measures the property's ability to cover its debt payments. Lenders typically want to see a DSCR of 1.25x or higher.
- Net Operating Income (NOI): The property's revenue minus operating expenses.
- Your Net Worth & Liquidity: You will generally need a net worth equal to or greater than the loan amount, and enough cash reserves to cover several months of payments.
Step 3: Prepare Your Documentation
Be ready to provide a comprehensive package, including:
- Last 3 years of personal and business tax returns
- Current Personal Financial Statement (PFS)
- Rent roll and leases for the property
- Property appraisal (if available)
- Purchase agreement
Step 4: Choose the Right Lender
Not all lenders are created equal. Commercial banks, credit unions, life insurance companies, and private lenders all have different appetites for risk. Working with a broker like Nexa Capital Solutions LLC gives you access to a nationwide network of lenders, ensuring you find the best terms for your deal.
Step 5: Review and Close
Once you receive a term sheet, review the interest rate, amortization schedule, prepayment penalties, and covenants carefully. After you sign, the lender will order third-party reports (appraisal, environmental, survey) before closing.
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Nexa Capital Solutions LLC can help you navigate the complex world of commercial real estate financing.
Get A QuoteBased in Los Angeles, Nexa Capital Solutions LLC helps investors across the US and Canada maximize their returns with smart financing strategies. Contact us today to discuss your next project.