Commercial Lending Terms

[Jason V.]

I've been working on a deal for a small commercial apartment building (5 units.) If this were a 4 unit instead of 5 (chop a unit's worth of everything off) I would have already bought it. BUT the commercial lending side of things is pretty intimidating to me because I've never used it before. (The flip side is this would be another property without needing to get another conventional mortgage.)

I met with the commercial lender for the bank I have most of my business with (mortgages and LOC) to discuss some things, and I know there won't be any issue actually getting the loan.

Right now I would be looking at 20% down, 5 year fixed (4.75% right now, which is the floor) that adjust to 5 Year Treasury plus 3.5%, 10 year maturity, 15-20 year amortization. 

So I think I understand everything, but my concern is what the rate goes to after the first 5 years. What's a realistic expectation for rate adjustment? What's a worst case scenario? If the deal still makes money at 15%, then I almost can't say no - and just hope it stays low so I make more. I know it'll be in the fine print, but what's typical for adjustment periods once the fixed term is over? Every year? Every day?

How much do I need to be concerned about refinancing at the 10 year mark? I either need to have a 2nd lender setup on the chance this bank won't go another term, or have the money in the bank to pay it off, right? If I don't 'spend' the cashflow from the deal I could get it to pay itself off within the original 10 year mark...but then I'm not making very good use of my money either. 

Thanks All!