Minneapolis, MN · Member since 2013 · 78 posts · 6 votes
Team,
Background -- 1 year ago, I purchased a convenience store, and converted to apartments. Also renovated the upstairs units.. It is now time to refinance the original 1-year note, and pay-out the guys who helped me seller finance, too... If you were refinancing a similar commercial property today, how would you approach this scenario --
Apartment in Minneapolis...
-- 5 year note @ 5.5%, 25 year am ....or....
-- 10 year note @ 6.0, 20 year am
Some thoughts going thru my head -- Goal is to pay this one down ...
-- how fast will interest rates increase in time? Is it better to lock in and pay the additional .5 points
-- Would you rather go with the short term finance option, keep the cashflow and pay down principal on your own time frame?
Lender · Glenview IL- CDLP NMLS#230554 · Member since 2015 · 2k+ posts · 747 votes
9y
I would say take 10 year note and pay points to lower the interest rate because you want to keep this property. Make sure you recover point in 3 years.
I hate the annual reporting I have to do for commercial loans and the reset/requals every 5 yrs, so I'm getting these commercial PITAs out of my life. Answering to these guys drives me nuts.
In addition I had to guarantee these low LTV loans personally, with the LLC that owns more than the financed property and my mgt s-corp which owns no assets but has rights to collect rents to my entire portfolio.
Higher risk and higher hassles have me laser-focused on paying mine off or refinancing into 10-yr fixed private money. As of May 1, I will only have on commercial loan and that will be completely paid off in 2019. Originally it was 3 covering 23 apts and 2 retail stores.
Your 5yr at 5.5% is a fantastic rate, but carries the risk of not being extended. Are these 5 and 10-yr notes just callable, or do they expire? I'd lean toward the 10 at 6%. A little more interest, but twice the time security.
How much are we talking about here? $100k? $1M+?
Will there also be the added bonus of annual financial reporting requirements? People talk about getting a commercial loan for their little house inside their LLC like its nothing. The commercial lending space is entirely different than residential. Guess they'll figure it out eventually LOL. Good luck!
Minneapolis, MN · Member since 2013 · 78 posts · 6 votes
9y
Thanks @Steve Vaughan-- right under $1 million .... I appreciate your comments. The banker I'm working with is so solid, creative. I know I could get a better rate elsewhere, but loyalty has me leaning toward working with her, trying to negotiate a 10 year, 5.75% interest rate. For annual reporting requirements, nothing really. Just updated PFS every year, and that is good practice anyway.
Lender · Glenview IL- CDLP NMLS#230554 · Member since 2015 · 2k+ posts · 747 votes
9y
I would say take 10 year note and pay points to lower the interest rate because you want to keep this property. Make sure you recover point in 3 years.