commercial loans

So as you probably know if got my three 4plexes. Since we purchased prices have gone up here in Vegas and plexes are selling for 140-150 we bought at 112. So figure I’ve got about 200k in equity in the three units. I’d like to move to the Midwest and look at being able to pick up a 30-60 unit complex. 33k/door.

My question then on commercial loans are we looking at 20% or 10% down? Obviously looking at standard financing and what kind of requirements are we looking at? Are they going to consider the property cash flow over personal credit rating and personal income?

From the books I’ve read that were written pre bubble I’d be expecting 10% down with no worry about credit checks/income verification. I found a property in ok that’s 1.8mil and is only at 60% occupancy with avg rents at 525. Huge upside potential. But I need more information before I start making plans.

This is the type of financing we use on all of our rental properties. I would say the requirements depend completely on that bank. Commercial, or portfolio loans, are held and serviced by that bank so they will set their own percentage down requirements. We had one bank where we could get 100% financing as long as the banker could show equity in the property at purchase. We purchased several properties with him where we would buy a property in the teens that was valued at around 30k and that met their requirements. The bank we’re using now wants 15% down regardless of purchase price. I’ve talked to several other banks that wanted 25% and some that wanted as much as 30%.

The fact that you already have properties will make this easier for you. They will look at the whole financial picture - your property numbers as well as your personal financial situation. Even though our portfolio is quite substantial now, we still have to sign personal guarantees on all of our loans for the LLC. I’ve never had a bank tell us we didn’t have sufficient cash flow for our properties.

When we went into the banks, we took three years of tax returns, recent pay statements, and the yearly P&L statements for our properties. I’m pretty sure they pulled our credit the first time, but then not after that when we went back for other property loans.
We were getting 6.5% a few years ago and that has come down to around 5.25-5.5% currently. Expect 10-15 yr amortization…possibly longer on a larger deal.

From what we’ve experienced, this is one of those things where you get your foot in the door and things get much easier. I can call up with numbers on a deal and get approval with these banks now.

There are several towns in the mid-west with good looking numbers for properties. You just have to consider the area and clientele.


Commercial Real Estate will likely have a LTV that maxes out at 75-80%. And of late that has been based on the lower of purchase or appraised value, that way you have some skin in the game, regardless.

Requirements are going to include guarantees, full financial reporting from you the borrower, and an examination of your past experience/ expertise, and your own capacity along with that of the property.

Good luck