Owner Occupied Commercial Real Estate: Is It Right for You?

The vast majority of business owners start out renting the space they need. However, there may come a time when a business owner becomes frustrated paying for someone else’s real estate. When that happens, consider investing in yourself via owner occupied commercial real estate, often abbreviated as OOCRE. Owning the property your business occupies offers financial and material advantages that are not available to you as a lessee. Let’s take a look at some of the advantages of OOCRE, as well as the qualifications and available financing.

The Advantages of Owner Occupied Commercial Real Estate

When you own commercial property, there are certain tax advantages such as the ability to depreciate the asset and the ability to deduct the annual interest on the mortgage.
Also, the value of commercial property tends to appreciate over time. Therefore, adding commercial real estate to your investment portfolio can reduce risk without sacrificing return. And as you build equity in your OOCRE, you may one day leverage this asset by either selling the property or leasing it out for the benefit of an income stream. Those rental payments create cash flow that can go toward your mortgage as well as the maintenance of and improvement to your property—both of which you also control.

What are the Requirements for Owner Occupied Commercial Real Estate?

For SBA (U.S. Small Business Administration) lending purposes, a property is considered owner occupied when 51 percent or more of the property’s space is occupied by the owner’s business, and the owner pays at least 51 percent of the rent.

Beyond that, lenders want to know your business is secure. Be prepared to show a solid financial statement, a profitable business record and enough cash for a down payment to qualify for financing.

Generally speaking, lenders consider OOCRE a lower risk, because they know the owner will be committed to the property both as the landlord and major occupant. This, combined with your company’s profits and cash flow, assure lenders that their risks are low.

Available Financing for Owner Occupied Commercial Real Estate

Good financial records and a profitable business are, of course, important. However, not all business owners keep great records or show taxable profits. Nevertheless, there are numerous financing options for both good and bad situations. These include:

  • 100 percent financing for owner occupied commercial real estate that could include working capital, inventory and FF&E (furniture, fixtures and equipment)
  • Loans available for re-finance, working capital, inventory or FF&E
  • SBA loans that can close in 30 days and include real estate as part of the collateral
  • 60-70 percent LTV (loan to value) financing for real estate, even if the borrower has poor or no credit
  • Loans available for those with bankruptcy, prior foreclosures or poor record keeping
  • Second liens
  • Equity available to acquire businesses and real estate
  • Equity and loans available for distressed situations or quick close
  • Equity capital for partnerships and joint ventures
  • Expansion programs including multi units and growing businesses
  • Sales and sale/leaseback for owner occupied commercial real estate
  • Note purchases

New lenders and investors are constantly entering the capital market. So, chances are good there’s a capital source to help you own your own property. To find out if owner occupied commercial real estate makes sense for you, work with a professional broker.


The information contained in this article is general in nature and should not be construed as financial, tax or legal advice.  As with any financial or legal matter, consult your tax advisor and legal counsel.