I'm tossing around the idea of purchasing some office space, but the commercial world is pretty foreign to me. What are the typical terms and common rates? I did some Google fu, but stuff is really all over the place.

Typical terms will be a 5 year note, 20 year amortization (can vary here from 10 to 30) with a rate dependent on quality of borrower, LTV and property. Lots of variables that will impact rate and terms but this is my experience.

Would certainly suggest talking to a mortgage broker or some lenders. In my recent experience, generally looking at:

-5-6 year term, sometimes one or two 1-year extension options if certain economic thresholds are met (DY, DSCR, etc)
-Typically some interest-only period (12 or 24 months), and otherwise amortizing over 20 or 30 years with balloon payment at maturity
-65-75% LTV
-for variable rate loans, 2-3% interest rate spread over some benchmark rate (recently SOFR)
-for fixed rate loans, somewhere in the ballpark of 5-6%
-Nonrecourse guaranty (or perhaps a completion guaranty if loan funds are being used for capex) provided by some affiliate that has the strength to financially backstop the deal

Happy to answer any questions, but As the other poster mentioned, all of this largely depends on financial strength of the borrower/guarantor and the property

Appreciate the replies. I definitely plan on talking to some lenders, was just trying to get an idea of what I'm going into. I know when I was looking at residential construction loans I was shocked at how big of a difference rates and terms were between banks. I'm in the CS area if anybody has recommendations.

I think I left some important information out. I would be occupying the space. The company i work for (limited partner) would be leasing it.

Owner occupied will help on terms although probably not materially. A month ago, the terms list above were probably obtainable (although I think the LTV levels were probably high). Things are really crazy this month.

Just one thing to consider..... You are putting a couple of eggs in that basket. You are buying a building and leasing it to your employer (or self employer). If something goes wrong with that business, you are out of a job and your tenant is gone.

MTTANK said:

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I think I left some important information out. I would be occupying the space. The company i work for (limited partner) would be leasing it.

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Owner-occupied is a positive for potential lenders. Having a tenant in place will also help secure funding but, as noted above, things are pretty crazy right now with rate movement and the Fed raising rates into a recession. If you have a relationship with a banker or two, talk to them informally to get a feel for what's happening in capital markets.

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Depends on the lender, the asset quality/characteristics and it's repayment ability, the financial strength of the guarantor and borrower, and other factors such as what the collateral is being used for/held.

Base line bank terms would be:

70% LTC/LTV loan amount
5-year term
20-year amortization (25-year for newer construction)
1.0% origination fee
Full recourse
1.25x DSCR minimum

This