Investor · Cleveland, OH · Member since 2011 · 603 posts · 130 votes
I just filled my 6 unit office building that I purchased vacant in October 2019, rehabbed and rented. Its bringing in $5200/month in rents and I am looking to get my lenders paid back.
What is the market right now for this type of deal. I have 3 commercial bankers I have worked with on the single family side that I plan to run this past. The one I sent my loan request packet to said they could offer about 275K on the loan when I was looking for 320K and my loan balance is 305K. He said this was due to the climate.
Based on my figures of (NOI/CAP) - the building is worth 425-450K so I didn't think getting 320 was too unreasonable. I am going to sharpen up my request packet and contact more lenders.
Investor · Beaumont, TX · Member since 2016 · 171 posts · 277 votes
6y
It's not just NOI and CAP. Lenders are heavy in reserves right now and want to see 1 years worth of mortgage payments after the refi. Also many are lowering LTV because of whats going on. Keep looking around, but realize its a completely different world than 6 months ago and keep your standards realistic
Investor · San Francisco, CA · Member since 2015 · 302 posts · 206 votes
6y
I asked myself that same question a month ago because my usual lenders weren't working out at all. I kept at it, made lots of calls, and networked with people in my contact list and finally found someone to refi. We're closing next week. My was a multifamily and perhaps they are looking at offices differently these days but I'd still say to keep at it, you'll find someone.
Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
6y
We bought a $9MM apartment building right as this all started. Lenders across the board increased reserve requirements considerably. You're in a different situation, but it seems reasonable to expect that they'll want you to have significant reserves.
I just filled my 6 unit office building that I purchased vacant in October 2019, rehabbed and rented. Its bringing in $5200/month in rents and I am looking to get my lenders paid back.
What is the market right now for this type of deal. I have 3 commercial bankers I have worked with on the single family side that I plan to run this past. The one I sent my loan request packet to said they could offer about 275K on the loan when I was looking for 320K and my loan balance is 305K. He said this was due to the climate.
Based on my figures of (NOI/CAP) - the building is worth 425-450K so I didn't think getting 320 was too unreasonable. I am going to sharpen up my request packet and contact more lenders.
What should I expect? Bad time to refinance?
Are you underwriting as a ten cap? or higher? Such a small building (with assuming weak tenants and leases, do you have PGs?) The lender is going to look at your personal strength more than the asset.
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
6y
"$5200/month in rents ... Based on my figures of (NOI/CAP) - the building is worth 425-450K so I didn't think getting 320 was too unreasonable. I am going to sharpen up my request packet and contact more lenders."
1) Need to address LTV so a lender will need an appraisal. If $450K is the appraisal, $315K loan = 70% LTV.
2) Need to figure DCR (Debt Coverage Ratio) - At $315K and 3.75%, 30 years = $1459/month, assuming your rents are NNN, then meeting a DCR > 1.25 should be easy ($5200/$1459 = 3.56).
3) I'd hold off until COVID sorts itself out (EOY?). Banks are risk averse and even if the cost of money is cheap, they'll raise their margin as a risk-adjust - Which raises your rate.
Any chance you occupy >50% of the building? SBA loans are great and banks like doing them.
Investor · Beaumont, TX · Member since 2016 · 171 posts · 277 votes
6y
It's not just NOI and CAP. Lenders are heavy in reserves right now and want to see 1 years worth of mortgage payments after the refi. Also many are lowering LTV because of whats going on. Keep looking around, but realize its a completely different world than 6 months ago and keep your standards realistic
I just filled my 6 unit office building that I purchased vacant in October 2019, rehabbed and rented. Its bringing in $5200/month in rents and I am looking to get my lenders paid back.
What is the market right now for this type of deal. I have 3 commercial bankers I have worked with on the single family side that I plan to run this past. The one I sent my loan request packet to said they could offer about 275K on the loan when I was looking for 320K and my loan balance is 305K. He said this was due to the climate.
Based on my figures of (NOI/CAP) - the building is worth 425-450K so I didn't think getting 320 was too unreasonable. I am going to sharpen up my request packet and contact more lenders.
What should I expect? Bad time to refinance?
Are you underwriting as a ten cap? or higher? Such a small building (with assuming weak tenants and leases, do you have PGs?) The lender is going to look at your personal strength more than the asset.
I spoke with a commercial appraiser in the area and he said 8 cap.
"$5200/month in rents ... Based on my figures of (NOI/CAP) - the building is worth 425-450K so I didn't think getting 320 was too unreasonable. I am going to sharpen up my request packet and contact more lenders."
1) Need to address LTV so a lender will need an appraisal. If $450K is the appraisal, $315K loan = 70% LTV.
2) Need to figure DCR (Debt Coverage Ratio) - At $315K and 3.75%, 30 years = $1459/month, assuming your rents are NNN, then meeting a DCR > 1.25 should be easy ($5200/$1459 = 3.56).
3) I'd hold off until COVID sorts itself out (EOY?). Banks are risk averse and even if the cost of money is cheap, they'll raise their margin as a risk-adjust - Which raises your rate.
Any chance you occupy >50% of the building? SBA loans are great and banks like doing them.
It would be a stretch but not impossible. Are SBA easier to get right now?
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
6y
"It would be a stretch but not impossible. Are SBA easier to get right now?"
Well, based on the PPP program, they're flush with money :)
SBA loans are favored by banks since SBA will ensure a major chunk of the loan which lays off a lot of risk for the bank. Property just needs to be >50% owner-occupied.