An oft-overlooked form of financing for commercial real estate investors is the CMBS loan; which is also known as the conduit loan. The primary attributes of this is that the fixed interest rate is low when compared to other types of loans, and the leverage conferred is higher. As a real estate investor, you can buy CMBA loans on the secondary market in Real Estate Mortgage Investment Conduit trusts.

What Are Some of the Attributes of CMBS Loans?

The loan period ranges from 25-30 years, and you can only secure said conduit loan for the purposes of investing in an income-producing piece of real estate – such as apartment rental units, storage units, condos and multifamily residences. The amount of money you can secure via the conduit loan begins at about $2 million and goes up; clearly, you have to be a qualified buyer as determined by creditworthiness and proven financing sources.

More On Applicable Property Types for the Conduit Loan

Similar to the income-producing properties mentioned above, you can also use CMBS loans for industrial warehouse units, hotels, office buildings, medical/healthcare facilities, marinas and even parking garages – the latter make a lot more for the savvy real estate investor than might first appear. The increased risk associated with commercial properties may lead to higher interest rates, however.

As for lenders that specialize in conduit loans, you have your choice of a who’s-who list of financial giants: there’s JP Morgan Chase, Goldman Sachs, Morgan Stanley, Barclay’s and Citigroup – among others. If you can’t land with one of these, then medium-sized financial institutions like Blackstone Group and Rialto might serve as better fare.

CMBS loans comprise a higher-level financial field than others, and you will need to be familiar with topics such as yield maintenance vs. defeasance, and what option benefits you more between variable rate loans, interest-only loans and SASB conduit loans. Contact Capital Finance Partners to explore our funding solutions for commercial real estate.