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Commercial Real Estate FAQ With Stephen Epstein On Real Estate Development & Investments

What Are Typical Rates Or Terms For Commercial Real Estate Development Lines Of Credit?

The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.

Typically, banks are somewhat reluctant to give meaningful lines of credit against real estate, and particularly projects in development. Commercial real estate development loans, however, are seeing historically low interest rates if you’re looking for project financing. Your liquidity, your credit worthiness, and your asset strength all plays a role, but regular searching for current rates will give you a good feel of what is out there on a day to day basis. 

What are typical rates or terms for commercial real estate development lines of credit? So, banks are pretty reluctant to ever give meaningful lines of credit against real estate, especially for development, unless they’re pretty low leverage. So, lines of credit are pretty tough to get. Commercial real estate development loans, I would say, I mean right now we’re in a historically super low interest rate environment, which means that rates are very low, so I would say all-in you’re in the 4%-6% range for real estate development financing. And then if you’re buying a permanent asset that’s already built, like you’re buying an apartment building, you might get 3-4% type financing. But again, it’s going to depend on your liquidity, your credit worthiness, it’s going to depend on the strength of the asset, the strength of the collateral, the market you’re in. So there’s a lot of variables that are involved in this. And these things change a lot, so what I would do is just, you can do a quick Google search for commercial real estate mortgage rates, or development construction loan rates, and you can kind of just see the different rates and where they are that day. But that should give you a general sense for kind of where they are. 

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Richard Wilson