Mortgage on Commercial Properties

[Dee Mandrekar]

I am planning to get mortgage for purchasing multi-family property upto 1.5M and wanted to know what would be the best options. PML are giving very high interest rates of 10% plus. I have good assets with me just not a lot liquid cash sitting around to pay that much. Anyone can recommend this newbie some good directions pls.

Thanks in advance.

[Chris Mason]

Mortgage broker.

I picked a 7 cap to intentionally DSCR-constrain the best options to 70% LTV - in place NOI and cap rate determines the down payment requirement, a property at a 6% capitalization rate would require an even larger down payment. Option 1 will require experience and is just there for illustrative purposes, 2 and 3 (in the absence of experience owning CRE) will require that the borrower be local to the property (if you want the best financing available on your first rodeo, stay local and stay turnkey, your lack of CRE experience is offset by your presumed local neighborhood level knowledge, etc, you can get fancy & still get good financing once you've got local & turnkey property #1 under your belt). Represented here in no particular order is one national lender, one that lends in lots of Southern states including Texas, and one local to Dallas. 

The down payment is what it is. There is no FHA 3.5% down on an apartment building or a shopping enter, there's lots of gov't incentives for "everyone to own a home" and since 1-4 units residential are all considered "single family" homes that means young investors get to ride that gravy chain for up to 4 units, but nothing like that exists for CRE (the gov't backed CRE mortgage options require MORE experience than traditional/vanilla commercial mortgages).

Let me know if I can help.