Buying commercial property is underwritten differently than refinancing it. On a refinance the lender has operating history, a known rent roll and a seasoned owner. On a purchase there is a contract, a closing date, and a seller who will move on if financing slips. Speed and certainty carry weight that they simply do not carry on a refinance.
In short: A commercial or mixed-use purchase loan finances the acquisition of income-producing commercial property — retail, office, industrial, or mixed-use buildings with residential units above commercial space. Underwriting centers on the property’s net operating income and the debt service coverage it supports, plus the borrower’s experience with the asset class. Mixed-use adds a wrinkle: the residential and commercial income streams are often weighted differently, and the ratio between them can determine which capital sources will look at the deal at all.
On a refinance the lender sees actual operating history. On a purchase they are underwriting the seller’s numbers, which means the rent roll, leases, and trailing operating statements get scrutinized harder. Expect the lender to normalize expenses rather than accept the seller’s figures, and to underwrite to market rents rather than in-place rents where those differ. That normalization is frequently where a deal’s numbers change between offer and approval.
A building with apartments over storefronts is not one asset class, it is two. Capital sources handle that differently: some treat a property as residential when the residential income exceeds a threshold, others as commercial regardless of split, and a few will not lend on mixed-use at all. That threshold varies, so the same building can be a residential DSCR deal at one source and a commercial deal at another with entirely different terms. This is one of the clearer cases where placing across multiple sources produces materially different outcomes.
Commercial value is derived from net operating income and the market cap rate rather than from comparable sales. That makes NOI the single most contested number in a purchase. Deals break when the lender’s normalized NOI comes in below the seller’s, because a lower NOI produces a lower value, which produces a smaller loan, which leaves the buyer bringing more cash than planned. Underwriting the NOI conservatively before the offer avoids that.
If a property is under-leased, mid-repositioning, or the seller demands a close faster than permanent financing can deliver, bridge is often the right instrument. Acquire on bridge, stabilize the rent roll, then refinance into permanent commercial financing or DSCR once the income supports it. The permanent takeout should be underwritten in principle before the bridge closes — the same discipline that applies to construction.
Many commercial acquisitions include capital improvement plans: converting vacant retail, upgrading units, or bringing a building to code. Some capital sources fund purchase plus renovation in a single facility with draws, others require separate financing. Which structure is available materially affects how much cash the buyer brings at close, and it is worth establishing before the offer rather than after inspection.
A refinance has operating history the lender can verify. A purchase relies on the seller’s rent roll and financials, which get normalized and scrutinized harder. Purchases also carry a contract deadline, so certainty and speed of close matter in a way they do not on a refinance.
It depends on the capital source and on the income split between the residential and commercial portions. Some treat a property as residential above a certain residential-income threshold, others treat all mixed-use as commercial, and some decline it. The same building can receive very different terms from different sources.
It varies by asset class, tenancy and capital source, and commercial ratios are typically underwritten on normalized net operating income rather than gross rent. Rather than a single number, the practical answer is that the ratio requirement differs enough between sources to be worth comparing on a specific deal.
Some capital sources fund acquisition plus capital improvements in one facility with draws against the renovation scope. Others require the purchase and the improvement financing to be separate. Establishing which is available changes the cash required at closing significantly.
Permanent commercial financing generally takes longer than residential investment lending because of third-party reports and lease review. When the contract timeline is shorter than that, bridge financing is the common path — close on bridge, then refinance into permanent once stabilized.
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