100% Financing On Commercial Properties?

It's possible to get 100% financing on commercial properties if you have an operating company. ('sort of' possible if you are a sole proprietor too)

The key to 100% financing (0% down) is having a profitable operating company and keeping the profits inside the company versus paying out dividends/salary to yourself.

***There is an exact mathematical equation for what has to be kept inside the company and it's based around the financials of the property you are purchasing.

For Example:

At the moment a client of mine is looking at purchasing a 4000 square foot office space that they have been renting for 12 years. When they started renting, the property was worth $400,000. Today it's worth $2,000,000.

***The landlord kept more money then what the businesses kept over the last 12 years. Key word is "kept".

Approximate numbers:

1. $2,000,000 mortgage @ 4.5% @ 25 year amortization = $11,117/month

2. Bank require a 1.3 debt cover ratio, which means the total net incomes have to be $11,117 x 1.3 = $14,452/month.

3. The property has multiple office spaces that are rented @ $7500/month. They occupy 3 of the offices for themselves.

4. This means there is a monthly short fall of $14,452 - $7500 = $6972/month.

5. The operating companies between the 3 partners have a combined net income of $8000/month that is left inside the companies.

6. This $8,000/month can support the $6972/month shortfall.

Without the operating company, this property might only support a $1.2 million dollar mortgage on its own. With the operating companies we are looking at $2.0 million dollar loan.

If you are self-employed/incorporated, you should structure your company to buy commercial property vs renting commercial property. In the short-term it most likely will cost you more. 20 years from now, its most likely one of the best move you ever made.