Financing an Office Condo in New York City

New York City is a great place to conduct business. As the most populated city in the United States as well as the most diverse, you are sure to find a wide array of clients looking for what you have to offer. Because space is limited in NYC, many smaller companies are turning to office condos for office space because they’re the more economical option. However, chances are you’ll still need help from a lender to finance one. The process of investing in an office condo in New York City can be complicated, but evaluating all your options and making sure you have everything you need can make it a lot easier. Here are some things you should know about financing an office condo in NYC: 

Types of loans available

The types of loans available to you depend on what kind of office condo you want to purchase. Owner-occupied commercial loans are for those who plan on occupying 51% or more of the space they occupy. The qualifications for this type of loan varies depending on the lender, but generally, you would need a credit score of at least 700, a business that’s at least a year old, and a debt service coverage ratio (DSCR) of at least 1.25, meaning you can make payments back on your loan with some room to spare. Income property loans are for those who plan to lease the majority of their space to somebody else. Again, the qualifications vary depending on the type of lender, but generally, you would need a credit score of at least 700, and a net operating income (NOI) of at least 1.25, meaning your business makes enough of a profit for you to make your payments back. The terms can range from a few months to a few decades, and the fees and interest rates vary depending on the lender as well.

What to look for in a lender

New York City has plenty of banks and private lenders to help you finance your office condo. Just like with any other tough choice, it helps to evaluate the pros and cons of each option to make an informed decision. Banks have lower mortgage rates and can make long-term loans. However, it takes a long time to secure a loan, and their requirements (down payment, credit score, etc.) are more strict than those of a private lender. If you need to settle your debt before the due date, banks are less forgiving and have a higher prepayment penalty. Banks are the better option for those trying to secure larger loans. Though private lenders offer shorter-term loans and have higher interest rates, you can negotiate the terms of your lending agreement and the closing costs are cheaper. If you choose a private lender, the whole process can be completed fairly quickly with less headache. Whatever you decide, you should try to apply to at least 50 local lenders to improve your chances of acceptance. It’s also important to realistically consider the future of your company and how you plan to repay the loan.

What goes in your loan package

Whether you apply for a loan with banks or private lenders, you will need to put together a loan package for your application. Your package needs to be concise, yet informative to improve your chances of success. To start, include a short background on yourself and your company, especially if your business is new. Provide a copy of your business license, as well as verification that you meet the credit score and other requirements for the loan you are applying for. You should also incorporate a flattering picture of the office condo you are trying to finance. Next, add a business plan that includes your financial projections for the next three to five years to show lenders you will be able to afford the payments. Finally, include your personal and business tax returns from the past three years. When putting together your loan package, try to fit it into four PDF pages to make sure it fits through lenders’ size filters.

Aurum & Sharpe is a full service commercial mortgage broker and we can take care of the lending process for you. Contact us.

Doing thorough research into all the factors to consider and steps to take can help ensure the successful securance of a loan to finance your office condo. For more information, check out the links below.

On what to expect

On how to find a lender

Mortgage Rates

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