This is another topic that seems to generate a lot of confusion for real estate investors – getting a hard money loan for the down payment on a commercial investment property.

The problem is that many investors think a 100% loan to cost (LTC) loan is readily available from commercial hard money lenders. Unfortunately, this is NOT the case. Most will require that you or your investment syndicate have a minimum of 30% cash into the deal.

There is no 100% loan to cost commercial loan. And no hard money lender that I am aware of that will lend the money for the down payment anymore. There are some commercial lenders that will advertise a 100% LTC loan but they will either 1) take your upfront fee money and decline the loan for some stupid reason or 2) require participation (major equity + 6-10 points) in your deal.

The way that commercial investors get the money they need to fund the down payment on a commercial investment is typically by syndication. That’s putting together a group of individual investors as equity partners to invest as a group.

So, if you are looking to make the move to commercial investing I think it’s a great decision. But if your plan is to borrow the down payment from a hard money lender, you’re wasting your time. Your time is better spent developing your network of private lenders and investment partners.