All Forum Posts by: Chris Mason

 It's a combination of things like new jobs, new home is closer to existing job, new home has a bigger yard for my dog, fiance and I broke up so now I don't need as much space, bla bla bla. Nine times in 10, the truth shall set you free, and real life contains sufficient true facts to make it work. 

FHA is the only time there are hard/fast requirements. That, and lots of refi-only loan officers don't know what they are doing, but have been forced to offer purchase mortgages because no one is refinancing, so they just regurgitate FHA rules as if they were applicable to conventional, because they do not know any better.

7/25, 10 years maturity:

Fixed interest rate for 7 years.

25 year amortization / payment schedule.

Balloon payment in 10 years. 

That part is normal for commercial mortgages; 5 year maturity is common, and 2019+5=2024 is why many are expecting offices to have a rough couple years.

Net operating income (NOI) is net profit before the mortgage payment, and determines how big of a mortgage you can get.

NOI / cap rate = sales price, and sales price x cap rate = NOI. If you can remember $1m <-> $60k <-> 6%, you can bounce between price, NOI, cap rate. NOI, and thus cap rate, feeds into how much of a down payment is required b/c it feeds into the "sizing" of the loan.

Many asset classes, like apartments and offices, have less than ideal in place cap rates today, so you need 35% or 50% down to buy them (unlike a DTI-based home loan, your personal W2 income cannot be used to significantly offset). Not so with many mobile home parks. The guy was expecting something like 40% down based on talking to other folks buying commercial real estate (not of the mobile home park variety), so was super happy with 25% down, and then I had bigger pockets open in my other browser tab, and here we are.

Just sent this over to a client, in place NOI yields a ~9% cap rate on this park, which of course feeds into making 75% LTV doable. All are at less than 1.5 points. Blacking out just enough so that the exact property can't be looked up. Note one of them is at 65% LTV.

Good hunting!

 Reading between the lines, I sense heavy vacancy and/or significantly below market rents as it currently sits. So the property isn't yet ready for permanent debt. And on the other extreme, a hard money loan would be overkill, likely requiring vastly more than 25% down to boot.

Between those two extremes sits bridge financing. Typically interest only for a couple years, rate a little higher but i/o payment lower. These types of loans are approved based on a proforma and plausibility. Unlike the HML who in many cases would LOVE for you to be stuck with that trash rate long-term, the bridge loan will only be approved if they are convinced you will be able to reposition the property on the other side -- sell, or refi to perm debt.

If you are still looking to solve this problem, let me know if I can be of assistance.

"Average" CRE mortgage rates aren't really relevant to a rehab loan. But what you are saying isn't crazy, "good" CRE mortgage rates, on stabilized assets, are about 3% less than what you are looking at.

Sum it up and run it as a single multifamily. Overhead/maintenance will be more expensive, make sure you factor that in.

Good, hope it works, I need you to fill it up and stabilize it for me to be able to slap permanent debt on it, when you're ready! 3 months of rent receipt from 7 out of 7 should do the trick if you want max leverage, 5 out of 7 would probably do the trick for low LTV as long as one of those 5 is the big unit. Chat with you in.... 4-6 months!

Some good suggestions already above. I like that property. 

Now that you own THAT building, at THAT location, it might be time to do the "networking fluff" associated with being a "pillar of the local community." Chamber of commerce and all that jazz. You will have a hard time NOT finding folks to fill the building if you start showing up to those sorts of things. 

I suspect you will have other answers that are a variant of specific information and tips.

One that is a little different that I'll toss out there: find someone that has done this before, that also has $250k+, that wants to be a mentor, and see if they will go in together with you. Each of you are putting in half of the down payment, but I'd consider agreeing to a 60/40 split of the net income in favor of them. Their expertise has value, they now have good skin in the game, and they will/should agree to share their thought process when they say "that's a good idea" or "that's a stupid idea." 

They will do things like say "I already have a great property manager in that area," and now for other deals, YOU ALSO have a great property manager in the area. And when plumbing services are needed, great, now YOU TOO know a great plumber in the area, and so on.

 I think the "convert all offices to apartments or condos!" is mostly a nothingburger b/c of all the extra 'stuff' you have to put in, to make that office space into residential. 

But as storage? Oh, yes, absolutely. 

That would be my concern. A lot of office buildings sitting at 30%+ vacancy will be "for sale" soon enough, and self-storage strikes me as among the easiest and most plausible conversion of all that surplus space for sale on the cheap. There goes that double digit cap rate, a few years from now.