Suggestions on Commercial Lender? I Bit Off More Than I Can Chew

[JC Coulter]

Hi everyone! I put together a deal and ended up with a 15K square foot, 3 floor building. There's a lot of potential with this building but it needs ALOT of work. The place needs work on the roof, electric upgraded, HVAC, etc. I need suggestions on lenders for commercial properties that would work with someone just starting out. I have tried a local bank here but my DTI and CBR scores didn't match their requirements and the loan officer wasn't very interested in even working on anything commercial. I have a few properties that I would be able to collateralize. This one is overwhelming and exciting at the same time but probably because it's a huge project to me and I'm a newer investor.

Any help pointing me in the right direction would be appreciated!

[Tim Milazzo]

Hi JC,

 Congrats on getting into your first commercial deal. You mention it is a 15k sqft building. What type of building? Office? Retail?

 You're really unlikely to get a good bank loan to rehab this building. There are a lot of bridge lenders out there, but you won't want to lead the conversation talking about your lack of experience. If there's not much value in the property itself and you're asking for funds to put into it, in essence the lender will be investing in you.

 Step 1: Have a solid and compelling plan for the building. Have a pro forma budget that shows the capital you will put in, and the resulting financials of the building that you're expecting. It needs to be professional. If that's above your current capability, team up with someone.

 Step 2: Identify the right lenders, and pitch them on the deal in the way they need to hear it. Again, this is somewhere you'll need to be buttoned up - commercial mortgage brokerage firms (full disclosure, I own one) exist for this reason. The lender will open up the pro forma, deal summary, and your finances to see if it appeals to them. 

 Result: strong rehab projects at reasonable leverage can fetch a bridge loan with the high single digit rate, interest-only payments, and a couple points up front. The idea is to complete the renovations, get it filled up with tenants, and then refinance to a lower rate lender.