I’m a part-time RE investor. I’ve been doing it for about 7 years and currently own 2 duplexes. I very much like to acquire more properties and I have my eyes on larger unit count properties. The problem is that I’ve never borrowed commerical money. I’ve tried to learn as much as possible on this site and understand that commerical loans, unlike Residential, put a lot of weight on the property’s income potential. Following are my questions:
Could I borrow around $1m if I have about $100K to put down?
For a person with a credit score of 800 what sort of rates and terms should I be looking for?
Above and beyond property’s income what would the lender require to qualify me for the numbers I’m thinking about? Would they require that I have more experience in RE before they take a risk on me?
I am not a commercial lender but I have friends that buy apartment buildings and the lenders that they are using usually want 20% down.
I am not sure of the debt to income ratio on a commercial loan but I am sure the structure of the loan is based on weather or not you are buying a performing assett. If you are buying a building with a lot of vacancies I believe they are going to want more invested.
You could probably learn a lot by looking in the yellow pages for commercial lenders and just call them up and pick there brain.
Don’t let them pull your credit untill you are comfortable with what you have learned.
What state are you in?
The questions you will want to ask are these:
What is the min down payment on a commercial property.
What is your min fico score
What are your reserve requirements
Does your company require past rental management experiance?
If so how many years?
What kind of a vacancy rate should I use.
Three or four phone calls like that and you will have a really good idea of what the whole thing will look like.
Good Luck to you…
Banking relationships are a key factor in borrowing money for commercial deals. Every successful investor that I know has a personal relationship with a banker or two. The point is that banks loan money based on trust in the investor. You’re credit score says that you are trustworthy. Now you need to get to know the decision maker at a bank or two.
If you don’t know one of these decision makers, then I suggest asking other successful investors at your local REIA.
You are hitting on the nail Mike. One needs to have a relationship so that when you walk-in the lender’s office they know who you are and that puts you that much ahead.
Actually I just came back from chatting with a commerical lender. The bank actually carries all my mortgages (home+duplexes) and I have done business with them for 20 years. I thought that would be a good place to start since they have all my loan history at their finger tips. But I felt the meeting did not go very well. I was looking for someone to “build a relationship” with but this guy certainly was in rush to go to lunch! I guess its time to move on to another bank.
You can go 90% LTV on a multi-family commercial building.
Commercial lenders care more about the property than they do the borrower… Not to say that you credit history does not matter, but expect the same rate as someone with a 650 FICO. If you want 10 years fixed amortized over 30 Years you are looking at a rate about 3.5% above the current 10 Year Treasury.