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Updated about 4 years ago,
How do I finance this commercial office deal?
OK, so I'm going to try and follow the suggested framework for asking financing questions.
Your goals and story:
I am in the early stages of evaluating the purchase of a small multi-tenant office building that is 50% partially leased with an asking price of $500k. The remaining space is a shell and would need to be built out at a cost of an additional $100k.
Type of property:
Office
Location of property:
Central Florida
Purpose of financing:
Purchase, renovate and buildout.
Type of financing sought:
Not sure.
Current or prior ownership of real estate:
I own one medical office currently. Have owned, leased and flipped several offices and a townhouse in the past five years.
Occupancy:
Gross lease at $15/sf (about $10 NNN) on half the space. Tenant is on a 1 year lease with several 1 year renewals.
Value of property at present and/or your offer price:
$450,000
After repair value:
$780,000 based on a $62,500 NOI and an 8% cap rate.
Anticipated or actual appraisal issues:
Not sure
Current rents per month:
$15/sf gross
Fair market rents per month:
$15/sf gross
Down payment or equity:
Depends on the loan amount available
Source of down payment funds, if applicable:
Own funds and limited partners
Income Source:
Day job is general contracting
FICO:
Excellent
Credit issues:
None
Additional details:
Goal is to hold this property for between three and five years. Purchase price of $500k and improvements of $100 for a total requirement of $600k. Should I use short term private money to purchase and buildout the property and then put conventional financing after it's stabilized? If so what kind of terms would I be looking at? Wondering what would be the appropriate financing strategy here.
Thanks