Permanent Loans

Long-term senior debt loans that are used by borrowers to hold commercial real estate assets for periods greater than 12 months. Similar to a mortgage on a home, debt lenders allow borrowers to put down a percentage of the purchase price, usually between 20-35%, in exchange for suppling the remainder of the purchase price at a predetermined interest rate. Permanent loans are typically the best choice for maximizing cash flow on stabilized properties by offering low interest rates and long amortization periods. Permanent debt loans can be used to acquire new properties, refinance prior maturing debt, and take-out construction / bridge loans.

Situations Suited to Permanent Loans:

  • Investor seeks to acquire a multi-tenant office building for a purchase price of $5 million. The building is 90% occupied, and the major tenants in the building are in good standing and have between 5-10 years remaining on their current leases. The investor and his partners are able to provide a down payment of 25%, and the lender provides the remaining 75% with a repayment period of 7 years, at a fixed interest rate amortizing over 25 years. At the end of the 7-year period, the investor is able to refinance the loan and pay back the full amount using the new debt and repeat the process.
  • An apartment developer recently completed construction on a new multifamily property. She is in process of leasing up the building, and plans to be fully occupied in 90 days. She plans to hold the building in her portfolio, with the goal of long-term monthly cash flow for herself and her investors. The developer took out a construction loan of $3 million, and is seeking a permanent loan to refinance the debt and pay back the construction lender the borrowed amount, plus interest. With the income generated from the monthly rents, the developer is able to operate the property, pay back the monthly loan payments, and earn a profit.