You’ve found a dated office building priced below market, and now you want to upgrade it to reposition it as a modern Class B+ asset, appealing to premium tenants.
The only problem is that you can’t wait around for notoriously slow bank financing to come through, because the seller is entertaining multiple offers with quick-close terms.
What do you do?
Private lending is worth looking into.
Private loans for office renovations close so fast that you can bring in contractors while the ink’s still drying and move straight into renovation.
Provided that you’ve done your due diligence and know how you’ll exit, you can absolutely use this financing strategy to turn a tired asset into a profitable office building.
But first: Why renovate an office in the first place?
When well-executed, a renovation can help you move an office building up-market and boost its resale value.
Address safety and compliance
Does the building have outdated systems that you are concerned might become liabilities?
It’s prudent to bring old HVAC systems and electrical issues up to code before you start on any cosmetic work.
While you’re there, it may be worth installing smart access control and energy-efficient infrastructure to enhance the asset’s perceived value.
Modern design sells
Is the layout confusing or the lighting harsh?
Tenants and buyers immediately notice how a space “feels” the moment they walk into it, so you need to fix these first‑impression problems.
Why not refurbish the core circulation paths and shared corridors so that sightlines are cleaner and there’s more natural light?
If you want to cater to hybrid teams looking for plug‑and‑play space, perhaps you can make the work zones more flexible.
Maybe even add a signature wall or design feature that stands out in listing photos.
These touches can help the next tenant or buyer envision their business in the space, and will make it easier for them to pay a premium for that vision.
Improve its resale value
Dim lobbies and old carpets could become deal-breakers, even if the office building is in a great location.
Why? Because buyers — even seasoned CRE investors — generally stay away from spaces that haven’t been maintained.
This neglect tells them that there may be hidden problems.
Renovating the building will give you much more control over how buyers perceive the property.
Often, it makes sense to invest in renovating entry points and shared areas, which are the spaces that have a bigger influence on price per square foot.
Why should you use a private loan to finance your office renovation?
Private lending gets you through construction if you don’t have the liquidity to fund a full refurbishment upfront, or even if you do have the money but prefer to keep your capital in play for other acquisitions.
Are you trying to meet a tenant move-in deadline or resale target?
Private lenders are generally familiar with value-add CRE strategies, so they’re more likely to work with your renovation timeline and exit strategy.
Another great thing about private loans for office renovations is that repayment can be structured based on your business model.
You can make interest-only payments during the renovation phase and repay in full once the property sells, or set up a short-term bridge that covers construction until you refinance or exit.
What does the private financing process for office renovations look like?
It depends. There are generally two main options once you’ve decided to go the private route:
- Work with the lender that your contractor already partners with
- Bring in your own third-party lender who specializes in asset-based lending or CRE renovations
Once you’ve selected the lender, you’ll need to apply. The process is much leaner than what a traditional bank requires.
Depending on the provider, you may get a decision in a day or two.
This may take longer, of course, if the deal is larger or more complex, particularly if there’s layered financing or structural changes involved.
How do you choose the right private lender for your office renovation project?
Don’t pick a private CRE lender based on interest rates alone.
Instead, think about how the proposed financing structure will fit into your exit strategy. Will you refinance the building post-renovation or sell immediately?
Do you intend to hold and lease for 6 to 12 months?
- Some private lenders will let you delay repaying the principal by setting up interest-only periods during renovation.
Others might structure the loan so that you repay everything at once when the property sells (what’s called a balloon payment).
You can also set up short-term bridge financing to cover just the renovation period. - On the other hand, some lenders prefer fixed monthly payments from day one.
The key here is to find terms that fit your strategy so that you don’t run into cash flow issues halfway through the project.
If you are new to CRE investing, it’s a good idea to talk to your financial advisor or someone who knows how to model real estate outcomes so you can evaluate the impact of each repayment structure on your projected ROI.
How long does approval for private loans take?
Some approvals come the same day, but you should expect to wait 2 to 5 business days in most cases.
You will wait a bit longer if there are existing liens or multiple parties involved, but private financing will beat banks on speed by a wide margin in most cases.
Is financing better than cash flow for the office renovation?
That depends on your exit strategy and how much capital you are willing to tie up in the deal.
Financing can go a long way in helping you stretch your capital across multiple projects and gives you room to fund major renovations.
Even CRE investors with very strong cash positions still take out financing, not just to preserve their capital but also to spread the risk.
And because repayments often qualify as deductible expenses, you may also benefit on the tax side.
What’s the catch?
You will be locked into repayment terms, although that is not necessarily a bad thing. It just means that you have to plan realistically.
Are you working on a 12-month flip?
It might not make sense to take out financing that extends to 36 months unless you’ve got contingencies in place.
And of course, you have to weigh the total interest cost against your projected gain.
Financing only makes sense when you are sure that the value-added upside more than offsets your cost of capital.
Can I still get financing for an office renovation if I have bad credit?
Yes. Many private lenders will prioritize the deal over your credit score, so if your property has equity and your renovation plan is strong, they may approve the loan even if your credit history isn’t perfect.
Can I refinance after the renovation?
Yes. In fact, many CRE investors use private financing to fund the initial renovation and then refinance with a traditional bank at a lower interest rate once the building is stabilized or re-tenanted.
Can I use private office renovation financing to cover soft costs like permits or design fees?
Sometimes. Some lenders are willing to include soft costs such as permits and architectural drawings (and even project management fees) in their financing package. But others will limit the funds only to hard construction costs.
This is why you need to ask upfront what’s included and whether you’ll need to fund any portions separately.
What happens if my office renovation project goes over budget?
If you run into overruns, you’ll either need to inject your own additional cash or renegotiate with the lender, assuming that the value of the asset still supports the increased loan amount.
To avoid going over budget in the first place, it’s prudent to build a contingency into your budget (10% to 15%) and get realistic contractor estimates before closing.
Do I need collateral beyond the office property itself?
Not usually. However, some lenders may require you to provide a personal guarantee, especially if the project has limited equity or if you’re a newer investor.
What happens if I sell the property before the loan term ends?
You can usually repay the loan early, but you may need to shoulder prepayment penalties.
Confirm this with the lender before closing so that you’re not caught off guard at sale.
Can I use private CRE loans to finance tenant improvements if I’m repositioning for lease-up instead of resale?
Yes. Private lenders in the CRE space understand repositioning strategies and can offer creative draw schedules tied to tenant buildouts/loan structures that fund improvements in stages.
Just be clear about your leasing plan and rent targets.
Talk to us if you need CRE financing
If you are looking for funding for office-to-office renovations and repositioning, talk to our team here at Private Capital Investors.
As commercial property experts ourselves, we understand time-bound renovation and repositioning timelines.
Fill out our loan request form to tell us more about your project.
