Wow this commercial section is not very active huh?
Depends…but it is not ‘cowboys and Indians’ like the Beginners forum…
Keith
This sections just runs in cycles. It will be very active for a few weeks and then slow back down.
I think that commercial deals are a little bit scary to the normal investor.
I plan to 1031 my way up to playing with the big boys/girls
I am going to also start working on building up the credit on an LLC. Mine is over 750 but my net to debt is not good. I have a two year plan to wipe out all the debt.
What do you think? Am I on the right tract?
:eyecrazy:
Bruce
Are you kidding. Commercial deals too scary???
let me tell you something… Commercial deals are a lot cleaner than residential deals and a lot more profitable.
Especially when it comes to commercial space.
You can actually evict someone in a month if they don’t pay their rent. A residential eviction can sometimes take over a year without them paying rent the whole time.
The only reason that it sems scary to some is lack of experience and fear of the unknown.
The only thing to fear is fear itself.
(2 Tim 1:7).
For God did not give us a spirit of fear, but a love, power and a sound mind. (use it) 
Hi, I am attempting to purchase a 30 unit apartment building as my first real estate investment transaction. I do not know how to go about financing the transaction. I am going to purchase it under my LLC, but since it is new, I do not have any credit rating for it now. All the members of the LLC have credit scores above 680, with 3/4 members having scores above 720. The property is 2.7 million and runs about 85%-90% occupied last two years. I am waiting on due diligence paperwork to find out specific rents and maintenance costs. Is there a way that I can buy this without needing any of our own money?
Hi Kriskrench1
Your LLC is not the one whose credit is important.
Since your loan is almost certainly going to be a full recourse loan, the credit scores of the officers of the LLC are the scores that will determine your loan program and rate.
We have a program that will do 100% finanancing on apartment bldgs that are 20+ units and 2 million and under.
I do, however have a strategy that may work for you to minimize out of pocket expenses.
Depending upon the state that youa re located in, we could probably get you an unsecured line of credit for somewhere between 100 - 150k if you are outside of Florida and up to 550k if you are in florida to handle all or a portion of the downpayment.
Then we could finish up the conventional portion of the loan as 100% for the 2 million which would be a 100% apartment bldg loan for the 2 million dollar figure since the downpayment would have come from unsecured sources.
Some of your own money would have to be a part of it for any loan, regardless of where you went for the loan…
Appraisals and closing costs are always figures outside of LTV on commercial loans. On refi’s closing costs can be rolled into the loan but not the appraisal. Appraisal costs are always up front to the appraiser with commercial deals.
If I can be of any help, please let me know.
Jeff
Hi Jeff, I am also currently looking for apartment buildings to get started in real estate. I am trying to figure out how I would finance this since I have no money of my own to put into the deal. Would you be able to help me with the 100% financing that you mentioned? You also said that the credit lines are unsecured, what does that mean? Thanks, Mike
Kris, you said you are waiting on due dilengence paperwork, what does that include? When you are looking at a property do you just ask for due dilengence paperwork or something more specific? Thanks, Mike
I’m very interested in buying commercial property, I’ve read a few books and I feel like this could be a lucrative venture for me and my family. I’m not afraid, I purchased an investment property last year and it’s going pretty good for me - I’m trying to figure out how to finance a commercial property using equity in my investment property as collateral. I’m excited about investing in commercial real estate, I just need the financing.
D. Riley
Hi Driley,
The process is fairly simple. It has a few more working parts, however. THere has to be two appraisals. One on the property being purchased and one on the property being used for cross collateralization. A 2nd is placed on the collateralized property and the new loan is handled as a conventional loan.
If I can help you with anything, please feel free to email me or call.
Jeff
Jeff,
Thanks for responding to my post. Here’s my story: As I said in my posting, I’m excited about investing in commercial real estate and need financing. However, I have a few irons in the fire right now. I’m in the process of getting a home built, even though the builder hasn’t broke ground yet and my mortgage lender (a friend) is standing by to receive the subdivided land plat to complete the loan package for closing (I’m approved for the loan, just waiting for the plat as stated above). I am not using my investment property (a Condo that has at a minimum 60K equity in it right now) for the new home purchase. I’m looking at a commercial property in Austin, TX with an assumable loan of 2.4 mil. with lender consent and % fee. The interest rate is 5.5%, amortized over 20 years, due in 8. It’s 100% leased, NOI is 359K for 2005 with a monthly income of 58K. My middle credit score is around 680. Is this a dream for me or could this be a reality with the proper guidance. The company that is trying to sell it, manages it. Your candor and counsel would be greatly appreciated. As you see from my posting I’m very new to this!
Driley
Hi Driley,
5.5% seems mighty low. It’s over 2% below priime… So unless there are a lot of points on the front, I would be a little cautious and do some due cilligence before signing anything.
Also, I would be a bit concerned about an 8 year balloon.
It almost guarantees that you are going to be socked for soome hefty rates when you are forced to refinance in 8 years and if your credit score has droped you could actually lose the property if you can’t find new financing.
I think youowuld be much better off with someting like a 20 year interest only with a 5 year initial fixed period.
The interest only portion would significantly lower your monthly payment and your appreciation would happen though time as opposed to paying down the equity which would be almost nighitn over such a short period of 8 years. With an 8 year balloon, you are paying mostly interest and paying down a miniscule portion of the equity with the serious danger of the conditions of the balloon.
In residential lending a 680 score is a great score. A+, but in commercial lending, 680 is the starting point of good credit… not excellent but “A” or possibly even “A-” comparative.
Don’t worry about being a Newbie… You are asking all of the right questions.
Jeff
hello,
I’m daisy
I will be watching and learning from this section of the forum because I am most interested in commercial real estate investments.
Thanks for all of the input!
Daisy
And we’ll be looking for your input daisy.
Got any questions?
Hi Jeff. I’m not Daisy but I do have a question…
I am trying to close on an 11 unit building with the help of PM or a HML for purchase and rehab. The HML will want to see my exit strategy as a condition of the approval.
I’m wondering if I will be able to find a lender to Refi the building after the rehab and replace the HML financing with more conventional terms.
Any ideas??? Thanks.
J
Hi Sannyboy,
Unlike residential flips, commercial rehabs and/or flips usually do not require seasoning of title.
As long as the LTV is acceptable and the rehab is completed and signed off on, there should be no problem obtaining fuding.
Jeff
I’m making enquiries on a multiple building 224 unit apartment complex. I too am not afraid of the large numbers but I would like some ideas on how I could fund the asking price of $25 million. I’m hoping to use a HML for down payment and then conventional and hopefully some seller financing for the balance.
Hi Jaffman,
There are a lot of creative financing methods.
we have a number of different ways of financing a project like that.
A lot depends upon your creditworthiness, net worth, experience, the LTV you are looking for, the NOI and DSCR of the property.
If I can be of any help, please don’t hesitate to ask.
If you’d like, you can submit a loan inquiry on my site (see below) and I can give you some clearer options.
Jeff
Great. I was hoping you would respond. I will once I get the details. In the meantime:
Can you explain what DSCR means?
By creditworthiness do you mean FICO score?
What kind of net worth would I need for a deal this size?
Experience? I’m in the process of purchasing several homes but no apartment complex experience. Is the lack of experience derogatory?
I seek 80% LTV as I hope to get seller financing and or HML.