What Does “Owner-Occupied” Mean in Commercial Real Estate?

The concept of owner-occupied commercial real estate – also known as owner-user commercial real estate – is key to understanding lending options to finance a new property for a business. The financial upsides of owning versus renting are many. An owner will build equity with every mortgage payment and asset appreciation increases value in the property over time.

But, just running a business out of a property does not automatically make it eligible for SBA 504 financing from Liberty SBF. In addition, the owner must occupy more than half—51% or more—of the building’s leasable space for the purposes of running their own business. A business that has the same ownership as a holding company that owns the property is also considered owner-occupied.

In this case, the borrower is eligible for a US government-backed SBA 504 loan that gives you access to better financing than any other option.

But what happens if you still need a loan but do not expect to occupy more than half of the available square footage of the commercial property

Liberty SBF’s Conventional loan is a great alternative. Our Conventional loans allow occupancy of the borrower’s business to be as little as 30% of the total square footage of the commercial property.

Asset types that qualify for owner-occupied financing include industrial buildings, flex, retail, office properties, and professional medical offices.

Special-use properties such as self-storage, assisted living facilities/skilled nursing facilities and other healthcare properties, day care, sports facilities, and event centers also qualify. A multifamily property is not eligible for owner-occupied financing, but mixed-use buildings and hotels do qualify.

For more information on hotel property loans click here.

In 2010, the SBA deemed some businesses with rental income – also called passive income – eligible for its programs. This gave self-storage operators the opportunity to take advantage of the SBA 504 loan’s many benefits. To read about self-storage facility financing click here.

The SBA 504 loan provides small businesses that will be owner-occupiers access to the same type of long-term, fixed-rate financing enjoyed by larger firms. Interest rates are equivalent to favorable bond market rates. You qualify for the loan program when you have sufficient liquidity and net worth, and plan to occupy more than 51% of the facility you are purchasing for SBA 504 loans or 30% for Conventional financing.

As an owner-user, you are considered to be a lower risk for the lender, who is assured that you will be committed to the property both as landlord and as chief occupant.

Liberty SBF is a specialist in SBA 504 and Conventional loans. We believe that our owner-occupied loan programs have advantages that no other loan can equal, including:

  • Up to 90% LTV (loan-to-value ratio) financing,
  • Low fixed rates, and
  • Terms up to 25-years

Interest rates are low today, and now is the time to lock in your fixed-rate commercial real estate loan. When you work with an experienced lender like Liberty SBF, you can be confident that we will anticipate any problems and help you overcome any potential obstacles.

We can get the job done in 45 days or less. Contact Liberty SBF today. A Better Lender.