Looking for a Commercial Lending - 30 year note

[Whitney Hutten]

Hi! I'm looking to continue to scale my SFR portfolio and look to put a 30-year commercial note on my refinances. Would anyone know of a lender who can do that? I've explored local banks without success. I've found 1 lender to date that will do a 30-year commercial note, and the high rates are making the deals not that great anymore. Would love to understand how others are financing their rentals past the 20 conventional spots!

[Joel Owens]

Commercial is different than residential. It is typically funded differently than residential loans and how the money is borrowed by the lenders.

Loan sizes tend to be larger also and typical longest period is fixed for 10 years. I have seen longer but it is more rare. There used to be a big difference between 5,7,10 year fixed debt in interest rates but the gap has narrowed and more minor now. For my commercial real estate clients I like 10 year fixed and in some cases 7 year fixed for stabilized properties. I DO NOT like 3 or 5 year fixed products especially when it is 3 or 5 fixed and then goes to whatever market is later on. Example if 5 year fixed and then 5 thereafter I want a cap on it. So if rate was fixed 4.7 for 5 years I would want something where years 6 to 10 whatever interest rates are in the market it cannot go above a ceiling of say 6.5. That way the worst case situation can be modeled out and see if the property still performs or breaks even. If interest rate is open then depending on LTV when you go to refinance the lender might require additional cash down to hit DSCR numbers. So you get a double whammy of higher interest rate and more cash down or you have to look at selling at maybe in a non-optimal time in the market. Short term debt I tend to like for high value add projects where the cap rate gets blended up really high. This way you can likely sell in most market cycles and still make a profit or if interest rate is higher for refi you still cash flow well. Most cycles average about 8 to 12 years top to bottom. That is why I like 10 year fixed rate debt as likely a high chance at some point in the cycle for optimum refi or sale of the property.

Look up Mark Creason on here. He used to be in Colorado in the past and might have some ideas.