Get a fast estimate of your down payment, closing costs, and reserves with the cash to close calculator.
On a commercial purchase, plan for the down payment plus closing costs and reserves. The down payment is usually the gap between the price and the loan, which at 65 to 75 percent loan-to-value means roughly 25 to 35 percent down. Closing costs and required reserves are on top of that, so the real cash to close is more than the down payment alone.
Before you write an offer on a commercial property, you want a real number for the cash you'll actually need at closing. Getting surprised by that number late is one of the most common reasons a deal stalls, and it's avoidable.
The short version: the cash to close is more than the down payment. Plan for three things, the down payment, the closing costs, and the reserves.
The down payment is the gap between the purchase price and the loan amount. Commercial lenders usually lend against a percentage of value, the loan-to-value, and a common range is 65 to 75 percent. At that range, the down payment is roughly 25 to 35 percent of the price.
The exact figure depends on the property, the income, and the lender. A stabilized, income-producing property with strong numbers may support a higher loan, which lowers the down payment. A property that needs work or has thin income may support less.
On top of the down payment are the costs of getting the deal done. Appraisal, legal, title, and related fees. These vary by deal size and property, but they're real money and they're due at closing, so they belong in your number from the start.
Many lenders want to see reserves, cash you still have available after the deal closes. What matters is being able to show you can carry the property through a slow month or an unexpected cost. Required reserves aren't money you spend at closing, but they're money you need to have, so they affect how much cash the deal really ties up.
Two borrowers buying the same building can need very different amounts of cash, because the financing structure changes the math. An owner-occupied building financed through an SBA program can require a lower down payment than a conventional investment purchase. A bridge loan used to close now and refinance later changes the timing of when cash is needed.
This is exactly the kind of thing worth knowing before you spend money on reports and due diligence. We had a client acquire a 7,300 square foot office on a tight deadline where SBA financing was the right fit. It closed in under six weeks with long-term fixed financing, no bridge, and no balloon payment. The reason it worked cleanly was that the structure matched the property and the borrower from the start.
If you're looking at a building and want a real read on the cash you'll need, send the property type, the price, and how you plan to use it. We'll tell you what the likely structure looks like and what that means for your cash to close.
Alan is Managing Partner at BluRidge Funding and has worked in mortgage and real estate finance since 1996, with commercial lending as a principal focus since 2003. He holds an economics degree from BYU and a law degree from the University of Utah, and is a founding board member and former President of the Utah Association of Mortgage Brokers. More about the team.
Have a deal that fits this? Send us the basics and get a straight answer within one business day.
Not ready to submit? You can build a one-page deal brief in three minutes first.
Send the property, loan amount, and timeline. We'll review it and tell you whether it's something we can help with, within one business day.
