All Forum Posts by: Peter Jin

 Hey Peter, 

Is this your first CRE rehab?

There is construction financing for renovations as well. Usually 75-80% LTC if through a bank, and perhaps slightly higher leverage through an alt lender. You are correct PFCU does not offer construction financing. However, they along with most Credit Unions are generally good banks to house your stabilized properties because the national charter which applies to many credit unions precludes them from being able to charge a pre-payment penalty which is a huge cost saver if and when you want to refinance. Trumark now does offer construction financing. A large team moved over to Trumark from HVB following the FCCB acquisition. They are building out the platform from the ground. I am coincidentally their guinea pig client and was the first to originate a construction loan on a 4 unit mix-use building towards the beginning of the year. 

@Peter Jin  Why can't you fund this through a bank? Many small and regional banks in the Philadelphia area offer construction loans that would be a fit here. The fees are lower than alternative lenders as well. The only thing to be aware of is the fact many banks would have a construction to permanent component with a pre-payment penalty. In some instances, especially when bank construction financing is at WSJ Prime +1%, the total finance charges using a bank vs. alt lender who is more expensive on origination and rate but does not include a pre-payment penalty if you were to look to refinance even out or become a lot closer. Something to certainly take into consideration, but there is no reason why you can't finance this through a bank based on the facts provided.  

As many have stated @Peter Jin, your expected CoC return should probably vary based on multiple factors. It does for me. When I first started out back in the early 90's, I had a set CoC return of 20% no matter where I was buying, the property type or project. That was a huge mistake…to say the least. I had to learn to adjust my numbers based on those factors and more.