Commercial loan for 5 family

[Gary Northcutt]

I keep here you guys talking about commercial lenders not looking at personal finances just the property but why does all the lenders I'm talking to want my personal finances and a personal guarantee on the loan? The property I'm buying is an off market deal with a gross rent of $3,065/month (which is below market) with a cap rate of 12.2% and a net profit of $1,000/month (figured using the Bigger pockets calculator). The purchase price is $175,000 and I'll put 20% down. (I haven't been able to find a lender that will do 10% down) This is the first time I have had to obtain a commercial loan and don't completely understand how this all works.

[Frank Chin]

@Gary Northcutt

You never could predict the future in business situations. I'm almost 40 years in doing rentals, and a few years ago, I sold some of them and paid off the mortgages on others. So I'm basically mortgage free. Then, some of my friends say "hey, why are you doing this, you don't have leverage". It's true, real estate values here went up like crazy years after year".

Then the pandemic hit. I don't have that many tenants and one is 14 behind on his rent. At one SFH rental, that's $2,500/month I'm not collecting. So even my tax returns from prior years doesn't reflect this year, where rental income was zero. Some local owners have a majority of tenants not paying.

But I'm doing OK, and the rent assistance program just paid his rent for 14 months. I had financial assets behind me to cope, besides being mortgage free for this SFH, so I'm even up to date on real estate taxes. Many newbies do not, and lenders have to be careful, especially during the pandemic.