Tri-Plex Renovation Loan Interest Rates

[Karl Hudson]

Hello BP Community,

I have a question regarding my triplex in Ocala, FL. The property needs a new roof, a new parking lot, and a few other minor improvements to enhance its performance. While I have sufficient liquid cash on hand, I prefer to maintain liquidity as I'm actively seeking my next deal.

The property currently cash flows around $1,800 a month after operating expenses. I'm considering a business loan of $35,000, with my credit score at 748. The offer I received is a 9% interest rate on a 5-year term, resulting in a monthly payment of $726. There's also an option for a 7-year term, but it comes with a higher interest rate.

I have the flexibility to pay off the loan without penalty, which I plan to do after securing my next deal and cash-out refinancing this triplex. My main concern is whether a 9% interest rate is reasonable in the current market conditions given my credit score. Do you think there are better rates available, or is this typical for business loans at the moment?

Appreciate any insights or advice!

Thanks,

Karl

[Karl Hudson]

Quote from @Ray Hage:

A 9% rate is within reason imo assuming they are not charging crazy points or other fees. HELOCs have similar rates at the moment. Does it absolutely need a new parking lot or can you patch up what is there? Maybe you could pay the roof and other minor improvements out of pocket and wait for the parking lot till later. Sometimes you can also finance a roof through the company doing it. Ask about financing and see what their rates are AFTER they give you price quotes.

The parking lot is currently causing significant flooding, along with numerous cracks, potholes, and tripping hazards. To address these issues, the lot needs to be properly sloped to divert water away from the building. During heavy rains, which are common in Florida, tenants almost need to wear waders to get from their cars to their apartments.

The roofer does offer financing, but the rates are comparable to what we can obtain elsewhere. However, if we pay in cash, they will offer a 7% discount. I plan to use funds from the business loan to take advantage of this discount. Regardless, the project will be financed with the intention of paying it off once I secure my next deal.