Commercial Balloon Loans

[Ed Lopez]

I'm getting ready to make an offer on a property with two triplexes and two 3/2's which have rooms rented individually for a total of 12 doors.  This will be my first purchase out of state and my first purchase that requires a commercial loan.  The local bank is proposing a 5 year balloon loan at 4.5% that is amortized over either 15 or 20 years.  I've never dealt with anything but residential fixed rate loans.  It gave me a bit of pause that the loan will have to be renegotiated in 5 years at who knows what rate.  Asking around so far most people have said this is common practice.  Just looking to get some advice on the deal and wondering how much I should hold in reserves for when it's time to redo the loan in 5 years.  Any advice is appreciated.  Thanks.