Looking for some advice from the more experienced commercial investors:
I have found many properties in my area that are in good shape financially and are being offered at reasonable prices. One particular property is being sold at a current (not proforma) cap rate of 12%. The problem is that I don’t have the cash for the downpayment, and I can’t find a commercial loan above 90% unless it’s a rehab loan. If I were buying for cashflow, I wouldn’t want above an 80% loan anyway since the rates skyrocket. Can anyone suggest a means of financing the final 20% and closing costs, or does anyone know of a commercial mortgage lender who will do a 100% non-rehab loan?
I am working on a rehab deal with private loans for the 5% that the HML is requiring. I plan on getting a cash out refinance when the project is completed and rented. It is expensive to have to get two loans but with my credit history I see no other way. Hopefully everyone can make some money and the project will be a big success. Just one way to do a deal with a few grand as earnest money and appraisal money up front as being all that is needed.
You can get 95% CLTV if the seller is willing to take back 20%, as long as the other 5% is not a loan and the seller does not contribute more than 3% towards closing costs I don’t see a problem. Keep the golden rule in mind: “S/He who has the gold makes the rules.”
If you cannot come up with atleast 5% of your own funds on a commercial deal you don’t have any business buying a commercial property.
"If you cannot come up with atleast 5% of your own funds on a commercial deal you don’t have any business buying a commercial property. "
See, that is wrong right there. Some people true…but others that are willing to put forward the effort to do something should be able to have the chance. I came accrossed an oppurtunity that will have a positive cash flow of $1600 with a 20% vacancy $3,500 fully occupied, which would more than double my regular job salary, but its looking like i cant because my parents werent rich and i dont have $150,000 to put down. I am fully capable of going through with this project, but its looking like i have some hurdles to overcome. The thing that bothers me the most is if it were a 4-plex and i could prove the same kind of profit, i could get the loan.
Assuming your “A paper” a good rule of thumb for figuring out rate on a commercial loan fixed with a 20 year amort is prime + 1. There are a lot of factors involved when comming up with a rate, but none the less, it’s a good rule of thumb. NOTE: Prime rate is published in the Wall Street Journal. Prime is currently 6.5%
“Assuming your “A paper” a good rule of thumb for figuring out rate on a commercial loan fixed with a 20 year amort is prime + 1. There are a lot of factors involved when comming up with a rate, but none the less, it’s a good rule of thumb. NOTE: Prime rate is published in the Wall Street Journal. Prime is currently 6.5%”
Assuming “A Paper” your local bank will usually offer 20 year amortization.
However, 25-30 yr Amort. are easily available and can make a big difference in your cash-flow.
Commercial loans based on the Prime Rate are usually “Short Term” such as for Bridge loans, Construction Loans, etc.
Most Commercial loans are based on the 10 year Treasury yield which is currently at 4.29%. Adding 1.5-2% to that rate should put you in the right ball park for many types of loans.