All Forum Posts by: Chris Mason

This will cost more than you think. Environmental reports...

That doesn't strike me as too crazy. She or he is themselves an entrepreneur, perhaps their exit plan is to get the business up and running, and then sell it somewhere in that 5-10 year window. 

Of course, it's your property and you have every right to say "no." 

For that specific type of loan, this looks normal. 

Asking for a 24 month term upfront will be cheaper than asking for an extension 12 months from now, and we all know it's not going to get done on time anyways, so that would be my "ask" in your shoes. Having a 24 month term on the front end will also make my job easier doing the take-out loan when it's time to refinance into permanent debt, because there's room in there for a full year of tax returns to have been done in the middle (if your exit plan is to sell, it'll also make it easier on your buyer who will presumably be willing to pay a higher price if they can get an A-paper good mortgage).

Ask for a 24 month term, tell your contractor you want it done in a year (and make it financially worth their while if they can pull it off), internally/mentally plan on 18 months, and I'm putting you on notice now to do your tax returns on time, rather than extending them (don't fight me on this, please just do it).

Trying to get a renovation mortgage like this for only 1 point is likely a waste of your time, but if you want to ask, after you've secured the above as a 'done deal,' go for it, can't hurt. 

GL!

These are all best execution for a well qualified sponsor. The below terms are live as of this date, for a rate and term refi (no cash out).

From left to right:

Points: 1, 1.25, 2.

Prepayment penalty: 10 years, 3 years, 5 years.

Commentary/review, hopefully this thought process is useful when evaluating offered terms for a maturing commercial mortgage that needs to be refinanced. 

Agency - as expected, always the best rate and lowest fees. The prepayment penalty could be painful if rates drop within the next decade. Most people will not qualify for this, Fannie multifamily is simply not an option for someone new to this asset class.

Bank - This is a Texas headquartered bank. 25 year amortization isn't the sexiest, but that's a human-attainable interest rate with very modest points/fees, with a short prepayment penalty. This particular bank will not support absentee (eg, lives in California or New York) borrowers, and requires a relationship. Texans only, so they're picky about the borrower. I love that the rate is fixed for 10 years, but the PPP is only 3 - best of both worlds, if you are that Texan: if rates go up, you're protected for a decade, but if rates go down you can refi penalty-free after only 3 years.

Credit Union - This is a Washington State credit union, coming in strong with that 30 year amortization producing a lower payment. They will be snobby about the neighborhood and wouldn't do the loan if it wasn't a nice area, and only on 1950 or newer properties, but you don't have to be a Texan to get this loan on a Texas apartment building, so they're picky about the property. Credit unions usually come in good with no or short prepayment penalties, but not in this case. 

 What's the prepayment penalty on option 1? A lot of the apartment loans I do have none, so if that's the case, proceed with option 1 and refinance whenever it suits you. I don't have enough details to opine on the rate/terms being good/bad, but it's not vastly outside the ballpark.

For option 2, why are you assuming you'd have to wait 6-9 months? The "seasoning" thing is for home loans, this isn't a house. :)

Mixed use as in office and retail? Retail and residential? 

Commercial lenders all have very narrow credit boxes, there's no reason to assume the lender that would do the mortgage on office/retail would also do the mortgage on retail/residential, to use two of the 40-something commercial property codes.

What price point? 

John Schenkenberger, tell him I sent you.

"Creative" is a very generic term. Are you thinking of putting sparkly hearts on the document to demonstrate your creativity, is your pain point the down payment and you're trying to navigate that with seller financing, is the issue that the in-place tenants aren't paying rent? Etc etc

 You don't want to give any reason to shut the door on the conversation, you're goal is to elicit interest. 

Send him a letter, emphasize that you are personally yourself the end-buyer, include proof of funds, include something attesting to you being financeable (unless your proof of funds is for the full cash purchase price).

If he owns 20 local businesses, good chance he's in at least one chamber of commerce, and if he's not, he 100% knows people that are, who will spill the beans and offer to do an intro if you mention you're interested in buying a gas station over a beer or a meal (there's probably like 3 people in that city that fit this description, why not get introduced to all 3?), at that event's monthly lunch, or whatever it is. 

When you meet him, mention that letter 30 minutes into that meeting, the light bulb will go off, but now you're not just the rando letter person, you're also the person that knows the person who introduced you, etc.