All Forum Posts by: John Mireles

Seems like you'd be better off wholesaling the property if you don't want to do any work to it. That would save you a lot of transactional costs. The other thing to consider is how much the property would sell for once fixed up. It's hard to compare two options without knowing what they are.

The first thing I'd do is get a contractor out there to determine whether it's in need of repair. Then talk to him about reinforcing it and ensuring that no kids can slip through the gaps (if there are any). If it's a bigger project, I suppose you might need a structural engineer to weigh in with a report.

I would just make sure that it's as safe as you can reasonably make it and then leave it at that. Once you attempt to stop someone from using the balcony, then you have a responsibility to make sure that they don't use it. If they do and something happens, then you actually are responsible.

The valuation was indeed my biggest concern. I needed the property to come in at $740k. Instead it came in at $1,250,000. So instead of squeaking by with 70% LTV, I thought I was sitting pretty at 40%.

How do you turn down a loan on an existing client sitting on 40% loan to value?

The rate quote to me was for a five year fixed. They tried to justify using the 7% rate because "the rate could fluctuate from now til the time the loan funds." Really!? It could go up 3.5 points between now and the next two weeks. There's conservative and then there's ridiculous.

The larger point here though is that anyone thinking that maybe they can stretch a little and go for a commercial loan on a larger property is likely to be disappointed when they go searching for money - especially from traditional banks.

Ha! They are my current bank. I switched to them after the demise of San Diego National Bank. Those SOB's pulled my corporate line of credit after my divorce and refused to reapprove it. I pitched them this property and they told me straight out that there was no chance. I'm in the midst of looking for a new banking partner. Even US Bank would give me a $30k line of credit with just a personal guarantee.

Believe me I'm knocking on other doors - though in speaking with other banks, I've been told that I can pretty much expect the same response. I'm looking at non-bank lenders. The problem is that the rates are significantly higher - from a point to three or four points.

Seth Williams - The problem here is that this is a refi on an existing deal with a customer with whom the bank has had a long relationship. I can't think of a better assurance of future performance than steady income, low LTV and a history of on time payments. It's just a very tough loan market out there with traditional banks.

And yeah, I went back to the bank and laid it all out. I even got the manager of the department on the line. He told me straight out that they were not going to loan to me no matter what I said. He would say one thing, I would refute it and then he would say, "Well we don't have to advise you of all the reasons why we don't approve a loan." Really?

I guess I should add that they initially said I was approved pending the valuation of the property. Then they came back and said that no it wasn't approved. Instead of trying to make it right, they just tried to justify their actions with misdirection and a "get lost" attitude. I'm done with US Bank.

Sure. Work your *** off. Or, study your *** off and apply for scholarships. Absent actually having a rich dad, there's no shortcuts here.

In fact, it's damn hard. I'm in the middle of trying to refinance my own mixed retail and residential property with US Bank. Actually, I'm done with US Bank. Despite a LTV of 40%, despite top tier credit, despite a 160% debt coverage ratio (the net income collected will exceed the monthly mortgage payment by 160% after expenses are deducted), despite a property that's appreciated by $500,000 over the loan term, and despite a perfect payment record over the past five years, my refinance application was denied.

I frequently see people on the forum asking about how they think they're close to being able to afford a commercial property and should they go for it. Well, unless your property is generating about double the cash required to service the loan, your net worth is at least if not more than the amount of the loan and your property will appraise at the price you're paying, you don't stand a chance - not with a traditional lender.

In the case of US Bank, they really stacked the deck against me. Instead of using the 3.5% interest rate that they actually quoted me to calculate the loan payments, they used a rate of 7% - even though there was no chance I'd be paying the loan at that rate. By using such a high interest rate as well as throwing in big management fees, vacancy rates etc that do not relate to my property, etc they were able to justify denying my loan.

The moral of the story here is that if you're thinking about going the commercial route, have your financing in place. Banks will impose conditions that make commercial loans prohibitive to all but the sweetest of deals to the most qualified investors. You may have luck with less conventional financing - which is where I'm headed. Just know that there's a huge difference between residential lending and commercial.

I woudn't dream of doing my own taxes. I work with a local tax preparer (he's not a CPA) who specializes in working with small business owners and investors. I'm on the phone with him every other week trying to straighten up my balance sheet, work on different tax filing approaches, massaging numbers for a loan app, etc. He was invaluable in my divorce when it came to working up numbers for my ex and I to pay taxes. He also does my corporate return.

I just can't imagine anyone being in business and doing their own returns. There's so much to know and so much new information coming out all the time. I used to pay a big accounting firm thousands to do my taxes. I pay my current guy hundreds and consider it money well spent.

I recently purchased a three unit, two building residential property using an FHA loan. The separate buildings were not an issue at all.