I was told by my lender (mtg broker) that you need 25% down to qualify for any commercial loan .
Howdy Campbellgroup:
Lenders do want you to have an equity position where if they have to foreclose they will be able to get their money back. It is expensive to have to foreclose and resell a property. I have been using hard money lenders where I have at least 30% equity after the rehab and still have to put some cash into the deal but not necessarily my own funds. It can be a partners or another lenders. On my tag line below I am always looking for 2nd mortgage lenders to help put together deals.
Thanks tedjr .But let me ask I hear a lot here about 80/20 and borrowing from other people to get the cash to do this and that that the bank wont lend.How in the Heck can there be any profit left after everyone gets their 2 cents and then some.
Depending on credit and assets you can get a commercial loan with an LTV as high as 90%. 680 FICO seems to be the minimum score to get you that LTV. Also, some lenders can go to 95% LTV if the seller will carry a second lien.
Howdy Campbellgroup:
You can not pay retail and pay high rates and points and make any money. There are 1000’s of deals at 6% to 8% cap rate where you can only afford to pay 4% to 6% interest to do the deal. You need cash flow, at least I do. The deals I do have cap rates over 12% after the rehab and lease up. I am paying 14% on first mortgages and 36% on seconds for short term only and usually have to prepay 4 to 5 months. If I had better credit I could do better and of course my own capital. After the rehab I plan to sell or refinance at a better rate and even pull cash out if refinanced. Here is the financials on the 30K foot building I am doing
Purchase price $165K
Rehab $220K
1st mtg $405K
2nd mtg $50K to cover down payment and carrying costs etc.
Appraised value after rehab $730K
Rent should be $9K per month.
I actually have it listed on Loopnet for $650 as is while doing the rehab and will be raising the price monthly as the rehab progresses.
I actually found this property on Loopnet the day it was listed and had it under contract the next day sight unseen but subject to inspection. I should clear $200K on the venture and even more if I finish the project.
How do you get a total mortgage for $455k when the sale price is $165k. Thats like -300% loanto value or did they take a different value than the sales price.If so why did your sell sell his 30k sqft for 1/4 its value?
Sounds like he got 60-65% of the After Repair Value.
I dont see your blg on loopnet? :iconfused:
Hi! Chris W what happened to the loan that you said you’re gonna do for me? Never heard from you again.
Ron, I left you a message on Monday morning and emailed you last night in response to your emails. Please call me at your convenience.
Hello Tedjr,
How’s the rehab coming along? Were you able to find a tenant? I’m a new investor and visit loopnet to search for properties. The cap rates on most is between 6-8%. And as you mentioned that is not sufficient if you want to get in with miminum downpayment. I guess the interest rates are more than 8% for higher CLTVs.
How do you manage to find properties with 12% or more cap rates?
Howdy Prashant:
I should be ready for tenants the first of May. I had to lay off a while to raise more money for some costs over runs. Back on track and looking good.
There are 15 spaces available for rent and I began advertising this past week. I also have a lady cold calling businesses and letting them know we have space available.
Finding great deals takes a lot of work. I am up late and rise early like Ben Franklin. I try to move fast too. I just missed a great deal at $5 per foot. I was not financially strong enough to meet another better offer that would close in 30 days. The Corpus deal was on Loopnet for less than a day, I saw it Thursday am and had it under contract by Friday afternoon.
I buy stuff that is vacant and bring it back to a useful life. I did not want to buy a 30,000 foot building and wait for months and even years to find a tenant but with this deal I can find 15 different tenants at $500 each per month and with a normal mortgage would only need 50% collections to make the payments.