Office Building Loans in California

One of the most challenging undertakings that an investor can undertake is that of acquiring an office building and the loan process that goes with it. In any part of the country, an office building loan is a specific type of commercial loan for obtaining an office building. Whether you choose to work with a single business or incorporate lease space for multiple businesses, the process can be frustrating and difficult.

There are three types of office space being used today. These are Class A, Class B, and Class C. To the uneducated investor, these terms are less than descriptive. But, they are very important in terms of real estate, particularly with regard to the overall value of the property and the potential income the property will generate.

Class A office space refers to the higher end commercial office space. These buildings are multi-floor and are often found in the center of large cities. These high end buildings attract top professionals in the legal, financial or medical fields and command top dollar rent. They have a prime location in high enery areas. These building have steel frames and generally have expensive lobbies.

Class B space is a wood frame building. The location is still rated as good but is not considered prime. These building are usually found in the suburbs or in the less pricey area of town. The buildings are in relatively good shape.

The type of office space classified as Class C can be found in buildings 15 to 25 years old. Class C office buildings can also describe locations in strip malls and around retail and service businesses. This space tends to be the most cost effective for tenants. It also offers the fewest amenities.

There are various things to remember when obtaining an office building loan in California. Don’t pay too much for the office building. If you do, you will spend a lot of time trying to make up the difference between what you paid for the building and what it is really worth. The lender will only loan you the market value of the property. So if you fall for a line from a slick talking seller that the property will reach its’ potential with a little work, you will be waiting on your profit.

The standard types of office building loans in California are the Fixed Rate Commercial Mortgage and the Adjustable Commercial Mortgage. Fixed Rate Loans are easier to budget as the payments and the interest rate remain the same throughout the term of the loan. With the Adjustable Commercial Loan, the borrower is able to qualify for a higher amount. Payments are subject to increase should the interest rate go up. It is possible for the Adjustable Loan to cost less than the Fixed Rate Loan.

Always look for a motivated seller when you are seeking an office building loan in California. Some traits of a motivated seller in this part of the country are: an elderly person who is tired of collecting rent, someone who has inherited property and doesn’t want to deal with the work, someone who has to sell on account of poor health, and someone who has paid too much for the property and has to sell out.

There are some good deals to be had if you are thinking of an office building loan in California. Remember to look for the motivated seller and get your financial records in order. You will have to have a good business plan to present to the lender. As the saying goes, you won’t get a loan on your looks.