Closing Costs to Expect With a Commercial Real Estate Loan

Move forward in your investment confidently and familiarize yourself with the common fees associated with the closing of a CRE loan.

There are a number of costs associated with the closing of a commercial real estate property that vary depending on the particular circumstance and specific stage in the process. It is important for investors to be aware of all potential costs and understand what type of investments certain costs are associated with.

Types of Fees To Expect When Closing a Commercial Real Estate Loan

Credit Check - Having a good credit score is extremely important when applying for a commercial real estate loan. The cost of this fee is dependent on how many investors are involved in the deal.

Lender Processing and Underwriting - This fee is typically collected as a non refundable deposit at the beginning of the loan process and should be clearly outlined in the terms.

Appraisal - In order to move forward in the loan process, the property must be appraised by a third party. The appraiser will look at the condition and value in terms of size, location and type.

Inspection - An inspection may be required to determine the scope of renovations or construction (if ground up) to complete the project. Inspections will generally tie back to the budget. Inspections are typical for heavy renovations and new construction and usually take place before, during, and at closing to ensure completion. The cost of these inspections depends on the size and type of the property and the severity of renovations required.

Environmental Report - An inspection specifically reporting environmental issues is required during phase 1 and phase 2 of inspections. Passing the phase 1 inspection, or immediately addressing issues, can save the investor money during the phase 2 inspection.

Title Insurance Policy - Title insurance is delivered to the lender by the title company in order to protect them in the event that claims come up against the title of a property. Expect fees for a title search to uncover any existing claims. Once the claims have been resolved, the process will continue.

Lender Origination Points - Origination fees, or points, are determined by the specific lender. These fees are associated with the evaluation, processing, and approval of the loan.

Commercial Mortgage Broker - A commercial mortgage broker may or may not be involved in the financing portion of a transaction. If the investor chooses to involve a broker, a fee will be set.

Legal Fees - Lenders and borrowers will be responsible for legal fees and will depend on the size of the loan and complexity of the transaction.

Mortgage Registration/Recording Tax - This fee is location dependent, but it is still important for investors to have on their radar. It can either be a flat rate fee or a percentage of the loan amount.

All of these fees are common when obtaining financing for commercial real estate investment properties. Understanding the fees that will incur for a particular deal and leaving room for miscellaneous expenses will help secure the propensity to maximize returns on an investment.

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About CALCAP Lending

A division of CALCAP Advisors, CALCAP Lending benefits from the expertise of a seasoned team of professionals with extensive, successful track-records covering a variety of disciplines and leading large, nationally-recognized institutions. A private money direct lender, CALCAP Lending provides short to mid-term financing for property investors and businesses looking to purchase, refinance, renovate, and construct residential or commercial properties.

Lending FAQs

You've got questions, we've got answers.

What is private money lending?

Private money lending is a collateral-based lending strategy that is often associated with shorter terms and more attractive features. A private money loan offers more flexibility than a conventional mortgage or bank loan.

How does a private money loan work?

Private money lenders provide financing using money from private entities. Private money loans often work as bridges to help investors gather funds to achieve their short term real estate goals, but long term, permanent options may also provide.

Why would I choose a private money lender?

There are many advantages to using a private money lender for your real estate investments! Private money lenders can be more lenient when it comes to borrower credit issues, often there are no prepayment penalties, you can leverage your cash to buy multiple properties, and private money loans are quicker when compared with institutional loans.

Can I get prequalified for a loan?

CALCAP has a responsive loan team who are able to prequalify you. Contact a loan specialist at 833.816.5580 to get started.

How long does the lending process take?

Private money lending can be a quick and painless process. From start to finish, 30 days is common, however, turn around times can be as short as 10 business days.

Can I still be approved for a loan if I have bad credit?

Generally yes, we understand that people have temporary financial issues that come up, and we want to work with you to help you rise up financially to a better place. Offsets to credit concerns may include experience as a real estate investor, good cash reserves, and/or larger down payments.

I am a broker or investor, how can I work with CALCAP?

Business is built on relationships. Ours is no different. CALCAP Value and Preferred Partners receive exclusive rates and services. For more details and to submit your application, visit our partners page.

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