I copied this from a hard money lender.
Commercial Real Estate Financing
Loan Size…$3,000,000 to $250,000,000.
Advanced Rate…Up to 100% financing available.
Loan-to-Value…General purpose…Up to 90%.
Special purpose…Up to 80%.
Term…Up to 30 years, fully amortized.
Collateral…First liens on assets financed.
Rates/ Fees…Vary based on qualification.
But they still want 10% to be held in a bank until the loan is paid off, at which time you will get the 10% back.
Here is what a different HML said to me about a $1,000,000 apartment deal.
He said that they will lend 100%, but they want about about $15,000 to be held aside at a bank, but they will give it back to me at closing as long as I don’t back out. They will “said” they will role in the cost of the appraisal, closing costs, and 12 months of pmts in to the loan. But the deal has to below 65% including all those expenses.
[b]Scott,
Do you believe they are not telling all the facts???[/b]
If that deal can support 12 mos interest reserves at a 65% LTV then … wow. :beer
Lenders will typically ask for a deposit to get the deal “off the street”. Just make sure in their commitment letter they spell out the terms of the costs, the refund AND that that it is a true commitment to lend - NOT a best efforts commitment.
The easiest (and cheapest) way to get to 100% on commercial deals is to cross collateralize. Either have the seller OR the lender take a position in a property other than the subject property to get the downpayment, costs, etc.
I don’t know where this idea comes from that it is ILLEGAL to get 100% financing or to get money back at closing. I understand and have said many times in the past that mortgage brokers can’t do it, but small local banks that keep their mortgages in their own portfolio can.
Small local banks will often loan based on a percentage of the appraised value, typically 70%. So, if you can buy the property for less than 70% of the appraised value (using their appraiser), then they will loan you 100% or even give you cash at closing. This is NOT ILLEGAL, as long as everything is disclosed.
As I’ve said many times before, the key to banking is to have a relationship with the president or vice-president at the bank. Personal relationships are important and don’t happen by accident! Get out there and meet the key people!
Of course HMLs will loan 100% of the money needed and that is not ILLEGAL. People borrowing from HMLs (at their loan shark rates and fees) typically don’t have money or credit. Therefore, if the HMLs didn’t loan 100%, they’d be out of business.
Mike
I agree that commercial HML should be out of business if they don’t offer 100% financing. But most do not. I have called many commercial HML in the past month. I only found two that would even consider the idea. Most want 8%-10% to be held aside in a bank until the loan is paid off or they want 8-10% put down. Either way it isn’t 100% financing. Some will lend $100,000 for every $20,000 you have in the bank, they call that a 100% financed deal. So you don’t have to put money down, but you need to have money in the bank (there are uses for this loan, but not for me). It doesn’t make sense that someone would use a HML if they had 10% to put down or 10% to put aside in a seperate bank not to be touched until the loan is paid off. But I think have I found a lender that seems to have some promise.
The nice thing about HML, is they really force you to look hard for only really great deals. So in a way they are almost less risk, especially for a new investor. Then you can refy a few months later and get a good interest rate because you bought at 65%, and even pull a little money out for the next deal.
Commercial lenders like to see some vested interest into the project.
With 50% vacancy is hard to do.That will bring down the LTV. How are you going to service the debt?
The deal wasn’t any good. It was literally in the middle of no where.
With HML if you get the property cheap enough I have spoken to a HML that will role the first 12 months of mortgage pmts into the loan. So you don’t make any pmts for the first 12 months. So that would be one way.