East Rockaway, NY · Member since 2016 · 67 posts · 1 vote
Can anyone advise in how to go about finding a commercial loan 6+ unit buildings? I'm currently looking at few properties that are between 6 to 10 units and Price range between 250k to 900k in Connecticut ( east hartford/new haven/new britain/bridgport). NOI and Debt ratios are Ok on these properties and I'm able to put down 20% to 25% but I dont have any landlord experience. Friend of mine suggested to find a sponsor with experience but besides that any other suggestions or is that my only option?
Lender · Dallas, TX · Member since 2015 · 19 posts · 14 votes
10y
Banker here. If you are able to put down 20-25%, you don't need a sponsor. Sponsors are more typical in large ($10MM+) deals. But any bank, even a small credit union, can gladly handle a real estate loan under $1,000,000.
Banks care a lot more about the financials than they do about your experience level (although that does count for something and may be a slight added risk in your case). However if you're planning to hire a property manager that will take care of that question. If the income ratios work, and your credit is good, and you aren't sitting on a mountain of consumer debt, and you can put down 20% and still have some decent reserves leftover, they'll approve you. Assuming the property appraises of course.
You just need to get a few quotes from banks to see what terms they'll offer. Start with any banker you know, or ask your CPA or financial advisor for a referral, or just walk into the local bank where you do business and tell them you'd like to speak to a commercial banker about a loan.
Lender · Dallas, TX · Member since 2015 · 19 posts · 14 votes
10y
Banker here. If you are able to put down 20-25%, you don't need a sponsor. Sponsors are more typical in large ($10MM+) deals. But any bank, even a small credit union, can gladly handle a real estate loan under $1,000,000.
Banks care a lot more about the financials than they do about your experience level (although that does count for something and may be a slight added risk in your case). However if you're planning to hire a property manager that will take care of that question. If the income ratios work, and your credit is good, and you aren't sitting on a mountain of consumer debt, and you can put down 20% and still have some decent reserves leftover, they'll approve you. Assuming the property appraises of course.
You just need to get a few quotes from banks to see what terms they'll offer. Start with any banker you know, or ask your CPA or financial advisor for a referral, or just walk into the local bank where you do business and tell them you'd like to speak to a commercial banker about a loan.
Lender · Dallas, TX · Member since 2015 · 19 posts · 14 votes
10y
I agree those rates are crazy. May have been some kind of atypical structure like 90% LTV or LTC or a credit issue of some kind. I work for a regional bank in TX, and while we do out of state loans there has to be some kind of local connection. But most bigger regional banks or national banks will do a RE loan anywhere in the country. You might try getting a quote from one or two big banks like Wells Fargo or Chase just to see what they offer. I'm sure in the northeast even local banks lend across state lines though.
For reference, we would offer the following on this type of loan:
1% origination fee, 80% max LTC/LTV
20 year term/amortization
4.75% fixed for 5 years or 5.0% fixed for 7 years (floating after at Prime + 0.50%)
We also offer 15 year fixed loans on non owner occupied CML RE at 4.99% and all sorts of other slightly different terms for whether the amortization is 15 years versus 20 and whether the rate is fixed or floating. But the above is probably our best bet for a buy and hold property like this.
If you want to go out 25-30 year amortizations, or when you want the rate fixed for more than 5-7 years, that is when the rate will start to tick up toward 10%. But 12-15% starts to be hard money type rates; I would think you could do much better than that unless you have a credit issue of some type.
Houston, TX · Member since 2016 · 92 posts · 21 votes
10y
Kay: I own a debt and equity firm that arranges financing for commercial and multifamily real estate across the country. There are better deals out there similar to what Elizabeth mentioned, even on a 25-year amortization. Thirty year amortizations are available but much challenging to obtain for your price range. Send me a colleague request and let's discuss.