I am an investor that is new to commercial and am wondering where other investors get down payment money for their deals? I am finding so many sweet deals but the down payment $ keeps getting in my way.
When I started out doing small commercial properties I got other passive investors together to create a pot of money to cover down payment and closing cost's. Then alloted a management fee to myself as manager for the group over and above a per dollar percentage of returns.
The fee may be a percentage or a percentage and a cash fee from cash flow per month!
Hope this helps,
To get down payments you will need a line of credit or a commercial bank loan and you can only do this by building business credit. Not personal credit. Other sources are hard money lenders. Most banks will only pay about 75% of the price of the property aka 75%LTV(loan to value). the other half is paid either by the owner via a carry back contract or a hard money lender who will pay the other 25%. The catch with this is that they will want 1st position which is a no-no and banks (or whomever puts in the most) will want 1st position on the loan. The owner shoudlnt even have 1st position; only because if it forcloses somhow you will lose all you’ve invested. I know that TMI but hopefully you see small portion of what i mean… :bobble
If you’re finding really good deals, then why not wholesale a number of commercial properties instead of letting them go. Wholesaling a commercial property, you should easily make $20k on the very low end to $100k plus. Now you have your DP for future commercial deals that you want to hang on to.