How does an inexperienced buyer get a commercial loan?

[Jared Ryan]

Hello BiggerPockets!

The motivation behind this post: I realized that if I sell my current home, I could have around $150k to invest, so I'm investigating the best possible usages of it, and if I could achieve financial freedom today (rather than my current planned strategy of slowly buying up BRRRRs in the midwest).

My first thought: go put that $150k to work getting a 20% down commercial loan on a 10 unit property somewhere in the midwest of the USA for $500k-$700k, and live in one of the units. I'm single and my total expenses are around $1k, not counting housing, so...it seems realistic to say that I should be able to achieve financial freedom through this alone (but I'll keep my W-2 for a bit longer so I can get more real estate investments to cover future family expenses, 1-3 years should probably do the trick, then just manage/grow my investments).

The two major hurdles I see here:
1. Is a 20% down payment on a $500k-$700k loan a product that commercial lenders actually give out? It seems like I could find companies that lend like this, but that it'll take a few calls to make that happen.

Question 1 for BiggerPockets community: I'd love to confirm if these numbers are possible for a commercial loan ^? I'd love to confirm this before getting too excited dreaming about financial freedom.

2. How to convince a commercial lender to loan to an inexperienced buyer? My current research suggests doing the following:
- Network and find myself a great property manager. That'll give my deal some credibility.
- Be prepared. Have a nice pdf/binder/presentation showing that even if I'm experienced, I do my homework, and that I'm the type of person that can step up to the plate and solve any problems that will come up.
- Emphasize that because of my W-2, I could pay for the costs of the commercial loan even if I make literally no rental income. I feel like that should give them some security that even if I was terrible, they'd be getting their money from me.
- Have good reserves. Probably means I shouldn't try to throw down all $150k in my deal, so probably shooting more for $500k-$600k
- Find a good deal. If I am prepared and find a legitimately good deal, then I can present a compelling case for them to loan to me
- I could present a lease-option deal to the seller and/or lender for 6-12 months. If I can't convince them to sell/lend to me outright, maybe I could convince them to give me a 6-12 month trial run, and through that, I can establish enough credibility that they will sell/lend to me.
- I could always try to find a partner with credibility and/or high reserves, but I honestly feel like this would be the most difficult and risky option for me. And it might also mean that the deal won't profit me enough to jump straight to financial freedom.
- I could also hope and pray that I find someone who could give me seller/owner financing, and use everything above to convince the seller/owner instead of the lender.

Question 2 for BiggerPockets community: Is this strategy ^ a solid-enough plan that it is worth pursuing? Or is my inexperience too large of a hurdle for a commercial lender to stomach at this time, so I should start with SFR BRRRRs or Airbnbs, like I've been exploring before this realization?

Thanks in advance!
Jared Ryan

[Tarik Turner]

yes there are lenders that will lend 80% of the purchase price but 75% is more common especially when dealing with 5+ units. Also there are loan products available for first time investors looking at commercial deals. As long as the numbers work out and you have a decent credit score you should be able to find a lender