All Forum Posts by: Brad Hayden

Do you have questions about the current lending environment and what options might be available to you? Do you lack the time and resources to complete detailed underwriting, prepare a comprehensive loan package, and manage lender communications?

I’ve spent the last 10+ years helping clients analyze opportunities and secure financing for their commercial deals. With common-sense underwriting, competitive rates, and an extensive network of lenders, I can provide unique individualized solutions to meet the specific needs of your project.

Schedule a free loan consultation at carreraresources.as.me/

@Mike Lauenstein

Hey Mike -- zoning is a big hurdle and now you can build it, but the question is … should you build it? Some key questions that need to be answered.

Is there a need for these units? What is the current market supply & demand? What is the overall occupancy for similar units in the local area? What are the market rental rates for similar units in the local area? Are competitors fully leased or are they offering discounts and specials to attract tenants? Are there other developments in process that will significantly alter supply & demand before you complete?

How much will it cost to build and how long will it take? The recent and ongoing price increases and labor shortages are causing many developers to re-examine their projects. Projects are still being done, but the numbers have to make sense. A solid current cost estimate with reasonable future increases will be critical.  

And that brings us to the numbers. Financing should cover 75-80% of the total project cost which leaves you to cover the rest. Using financing costs, carrying costs, your equity investment, the construction timeline, market demand, and the expected rents and expenses, what will the cash flow and return on investment look like once it's completed and leased up?

I realize that I've only scratched the surface here and I'd be happy to answer any questions you might have. Send a DM or connection request and we can set some time to talk.

- Brad

@Andrew Spikes

Without knowing any specifics of the deal, it's hard to get too detailed, but here are a few initial thoughts …

An LOI is typically non-binding. It's a good way to get all your intentions on the table, but there will be additional negotiations and details to be worked out in the actual contract.

Timeline - I agree with Courtney Duong - at least 45 days for due diligence. Plus an additional 30 days to complete funding and close. Commercial loans (especially SBA) can take considerable time. Closing within 75 days of fully executed contract. 

Earnest money - depends on deal size - fair and reasonable is what you and the seller agree on. Don't tie up any more of your cash than needed.

Evidence of financing - You are just starting the process and won't be able to fully engage lenders until you have an accepted offer. This sounds like the broker trying to gauge your ability to get the deal done. 

Contingencies - you should ask for an inspection contingency and a financing contingency (the seller not allowing a financing contingency could be a red flag - why won't they allow it?)

Hope this helps,

@Danielle Hake

Small balance commercial loans can be tough. Have you considered working with a commercial mortgage broker?  Especially if you're thinking of investing in several different markets. A mortgage broker will have an established network of lenders and will know what lenders work in what markets and which ones are best suited for the specifics of each deal. You won't have to spend your valuable time researching and screening lenders for each new market/deal.

I'd be happy to answer any additional questions you might have. Send me a DM and we'll set some time to talk.

@Kelly A.  Have you considered working with a commercial mortgage broker? Financing for multiple family 5+ units is a completely different product from any residential loan and being able to quickly identify and engage the best option for a specific deal may be the difference between a successful closing and a lost opportunity. Especially if you're thinking of investing in several different markets. A mortgage broker will have an established network of lenders and will know what lenders work in what markets and which ones are best suited for the specifics of each deal. You won't have to spend your valuable time researching and screening lenders for each new market/deal.

I don't work in CA, but I do work in NC and many other markets. 

I'd be happy to discuss further or answer any questions you might have. Send me a DM and we'll set some time to talk.

Hope this helps!

@Mario Ponzio - I may be able to help. 

What size projects are you looking at; ground-up; renovations; re-development?

What markets?

@Trevor Dominique -- my initial thoughts

What are the current (as-is) operating financials; physical occupancy, economic occupancy, revenue, expense, collections, aging, etc? This will determine how a lender values and finances the project.

I would put some more detail into the cosmetic updates -- is it just paint & flooring or will they need baseboards, trim, doors, cabinets & counters, appliances, fixtures, etc? With the price increases we've seen, this number could easily change your investment strategy.

Are the units that need upgrades occupied? If so, will they have to be vacated to complete the upgrades? How long will it take to complete the ugrades? What will that do to the monthly cash flow?

The assumption on tenants sounds good, but would definitely spend some time looking at supply and demand in the area. Are competitors full or are they offering discounts and specials to attract tenants? 

What is your exit strategy? Will you complete the value-add and sell or refi and hold?

Rather than an overall stabilized profit number, I would want to see monthly cash flow projections for the first 18-24 months to be sure of what it takes to get to stabilization. I would also look at some additional metrics such as cash-on-cash-return and return-on-invested-capital to see how this stacks up against other possible investments.

Hope this gives you some food for thought.

Hi @Nicole Macias - 

This might be a good place to start.  Mini Storage Messenger - RV & Boat Storage Development Handbook  https://www.ministoragemesseng...

I have a few thoughts …

1) a lender offering $0 down on a $2MM purchase, but requesting a $2000 upfront fee is a red flag in my opinion

2) current owner paid $450,000 in 2021 -- what specifically has changed to make it worth $2MM now

3) make sure you get all the operating details and do a thorough analysis before you make an offer; current rent roll, current past due accounts and aging report, past 12 months expense details, property tax statements, any recent capital improvements, any needed repairs, etc.

4) since you are new to investing/ownership, lenders may require 3rd party management

5) as for finding/verifying lenders, have you considered using a commercial mortgage broker? They will have an established network of verified lenders and will know which one(s) are best suited for the specifics of your deal. Here are a few tips:

– Don’t pay upfront fees to the mortgage broker, they get paid at closing for a successful loan
– Get a written contract upfront that spells out what the broker will provide and when (at closing), how, and how much (1-2% of the final loan amount) they get paid
– Be specific with what you are looking for; loan amount, usage, rate & terms, timing, credit, etc. Keep in mind that the perfect loan might not exist. Be prepared to discuss priorities and limits; what are firm requirements versus where you have flexibility.
– Ask for a detailed description of their process, estimated timing, and what you can expect
– Set clear expectations on when and how you want to communicate and receive updates

Hope this helps.

Timothy Hero brings up a good point. I've been brokering commercial loans for almost 10 years and the closest thing to a client face-to-face is the occasional video call.