The Structure
How a $3.2M Owner-Occupied Warehouse Loan Is Structured
One product, one building, one application. The distinction that made this financeable at 10% down is that the business occupies the property. An owner-occupied warehouse is underwritten against the building and the operating company that will pay for it from inside it — not as an investment property that has to pencil on a stranger’s rent. That is why the down payment is a fraction of what a bank asked for, and why the payment came in under the lease.
A bank wanted 25% down to buy the building. Owner-occupied financing bought it at 10%, for less per month than renting it
Representative structure
Larger facilities fund the same way when revenue, cash flow, and story qualify.
The Transaction
What the Distributor Was Buying
Bobby Friel
Founder, Basecamp Funding
Every distributor that has outgrown a building has done this math on a napkin: the bigger lease costs more, the landlord gets the upside, and in five years you do it again. The only thing that has ever stopped the obvious answer is the down payment.
A wholesale distributor outgrew its space and faced the choice every growing distributor faces: sign another five-year lease on a bigger building, or buy one. The bank wanted 25% down to buy — $800K the business needed for inventory. Owner-occupied real estate financing put a 25,000 sq ft warehouse within reach at roughly 10% down, and the monthly payment came in under the old lease. Funded in 28 days. The distributor builds equity now instead of paying rent, in a building it controls.
Underwriting
How an Owner-Occupied Warehouse Loan Actually Works
The building secures the loan, and the business that occupies it services the loan. That pairing is why an owner-occupied warehouse finances at a fraction of the down payment a bank asks for — and why the monthly cost can come in under a lease on the same square footage.
The Bank
What a bank underwrites.
Commercial real estate as an investment: the property’s appraised value against a conservative loan-to-value, which lands at 25% to 30% down. It treats the distributor’s occupancy as incidental. The $800K it wanted down was the same $800K the business needed to stock the bigger building.
This Structure
What owner-occupied financing underwrites.
The building and the operating company together. The business will pay the note from revenue it earns inside the property, and that cash flow — twelve months of deposits, a lease-equivalent payment history — supports a far higher loan-to-value than an investment property would. The down payment drops because the lender is holding both the building and the business that needs it.
Why Owner-Occupied Is a Different Loan Than Investment Real Estate
Search for a warehouse loan and most results assume you are a landlord. An investor buying a warehouse has to show the building pencils on someone else’s rent, with a vacancy assumption and a management cost, and the lender protects itself with a low loan-to-value. A distributor buying the warehouse it operates from has no vacancy risk — it is the tenant. The lender underwrites the operating company’s cash flow as the source of repayment, and the building as collateral on top of that. Same building, different loan, and the difference is roughly $500K of down payment on this transaction.
The Lease-vs-Buy Math Nobody Runs Straight
The renewal on a bigger space was going to cost more per month than the old lease. The purchase payment on $3.2M came in under it. That is not a rounding error — it is what happens when a 10% down payment replaces a 25% one and the loan is amortized against a building the business will still occupy in year ten. Add the equity: every payment on the note builds ownership, and every payment on the lease built the landlord’s. Over a five-year lease term the difference is the down payment several times over.
What $500K of Down Payment Actually Buys a Distributor
The bank’s number would have pulled $800K out of the business. The owner-occupied structure needed roughly $320K. The difference stayed in inventory — which, for a wholesale distributor moving into a building twice the size, is the entire reason to move. A distributor that buys the building and cannot afford to fill it has solved the wrong problem.
What Twenty-Eight Days Actually Required
A commercial real estate close has fixed steps a working-capital loan does not: appraisal, title, a Phase I environmental on an industrial property, and survey. Twenty-eight days is fast for all of that, and what made it possible was a prepared file — twelve months of bank statements, the purchase contract, the current lease, and the building identified with an appraiser already engaged. The lenders were never the bottleneck. The paper was ready before the clock started.
What the Building Actually Buys
Twenty-five thousand square feet is not just more racking. It is a distributor that can take on a line it had to decline for lack of floor, hold inventory through a supplier’s lead time instead of paying for rush freight, and stop negotiating with a landlord every five years about the space it needs to run. And the building is now an asset on the balance sheet that appreciates, that can be refinanced, and that a buyer of the business will pay for.
Run the arithmetic your own way: what is your current lease payment, what would the renewal cost on the space you actually need, and what does the purchase payment look like at 10% down on the same building?
For most distributors at this scale, the answer is that the purchase payment is close to the renewal — or under it — and one of them builds equity. That is a different question than whether you can spare 25% down.
The Products
The Products That Funded This Transaction
| Product | Role here |
|---|---|
| Commercial Real Estate → | The warehouse, underwritten as owner-occupied against the building and the business inside it |
Financing this whole sector: Wholesale & Distribution Financing →
The Result
What Changed After Close
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Related
Similar Structures
Representative scenarios — illustrative, anonymized figures, not specific client transactions.
FAQ
Getting a Warehouse Loan to Buy Your Building — Questions, Answered
How do you get a loan to buy a warehouse for your own business?
As an owner-occupied commercial real estate loan, not an investment property loan. The difference matters: an owner-occupied structure is underwritten against the building and the operating company that will pay for it from inside it, which supports a much higher loan-to-value than an investor purchase. That is how a $3.2M warehouse closed at roughly 10% down instead of the 25% a bank quoted.
What counts as owner-occupied commercial real estate?
Generally, a property where your operating business occupies the majority of the space — for most lenders, more than half. A distributor running its warehouse from the building qualifies. A building you buy to lease to other tenants does not, and it gets underwritten as an investment with a lower loan-to-value and a larger down payment.
How much do you need down on an owner-occupied warehouse?
Typically far less than a bank’s 25% to 30%. Because the lender is holding both the building and the operating company’s cash flow, owner-occupied structures commonly close at around 10% down when revenue and deposit history support it. On a $3.2M purchase, that is roughly $500K that stays in the business instead of going into the closing.
Is it better to buy or lease a warehouse?
Run both numbers on the space you actually need, not the space you have. A lease renewal on a bigger building often costs more per month than the purchase payment on the same square footage at 10% down — that was true here, by about $480 a month. Then add equity: every payment on the note builds ownership; every payment on the lease builds the landlord’s. Over a five-year term the gap is the down payment several times over.
Can you buy a warehouse without an SBA 504 loan?
Yes. The 504 program is one path to an owner-occupied purchase, and the timeline and the two-lender structure are the usual friction. A conventional owner-occupied commercial real estate structure underwrites on the same basis — the building plus the operating company — and can close in about a month when the file is ready. The trade-offs are real, and a specialist should walk you through both before you commit to either.
How long does it take to close an owner-occupied commercial real estate loan?
A commercial close has fixed steps — appraisal, title, a Phase I environmental on industrial property, and survey — so it is measured in weeks, not days. Twenty-eight days is fast. What made it possible was having twelve months of bank statements, the purchase contract, the current lease, and the building identified with an appraiser engaged before the clock started.
Does buying the building hurt cash flow for inventory?
It does if you put 25% down. At 10%, the purchase can leave more cash in the business than a renewal would, because the payment is lower and the down payment is a fraction of a bank’s. For a distributor moving into a building twice the size, that difference is what fills the new floor — which is the entire reason to move.
