All Forum Posts by: Krishna Shah

Quote from @Chris Mason:

"If that's the case is the best hope a 10/15 year loan with 30 year amortization with balloon payment due? Want to put 40% down."

I'd set expectations for 5-10 year maturity, 25-30 year amortization. 

"What requirements do banks look for?"

Experience is a big one, which he has, so good there. 10% post-close liquidity is a common requirement.

"How would they calculate DSCR? Based on Noi/Piti derived from the 30 year amortization? Or from the actual 10/15 year loan?"

Based on the proposed amortization, so the 25-30 years. NOI, yes.

"Hoping to get 70% LTV from current strip mall commercial property. 1 unit owner occupied. 30 year term."

It's only considered owner occ if that 1 unit is >50% of the gross leasable area. But, either way, yes that's realistic. Compare/contrast 65% v 70% LTV terms to see if that last 5% is really important to him.

"Would doing a cash out refinance first to purchase next property hurt the process in anyway?"

Nah, that's normal. 

Let me know if I can help; good luck!

I hope they offer atleast 10. 5 would be a huge risk because even though the plan is to cash out refinance 2-4 years post closing date and extend the loan… 5 adds a huge amount of stress. But happy to hear it’s possibly 30 years amortization. 

His current loan is 10 years with 10 years amortization. He was always safe in regards to PITI but you never know. 

liquidity won’t be a problem. 

only brought up owner occupancy of 1 unit to see if it added any benefit for cash out refinance or caused any harm. I guess it’s a non factor. 

65%-70% really doesn’t matter as long as the $800k cash out happens with a new $1.1M loan. The appraisal isn’t in our hands. 

But thank you for your help, and encouraging words. 

He has a very small amount of principal left as the loan payments end in 4 years. I’d say less than 300k.

The building is in excellent shape with $500k worth of gut renovations done to 2 out of 3 units, and a full exterior renovation. 

The loan would be less than his nw yes. 

Hi Brian, 

Thank you for such a detailed response. 

1. yeah his justification for only wanting bank financing does seem a little silly but he’s stubborn. 

2. I guess the priority has to be given to multifamily then over mixed use. But then again  million other factors come into play besides just financing. If the loan were 10 years with Balloon payment as you are suggesting, you are also assuming it’s payment is like if it were 30 years amortizing right? Sorry if this sounds like a silly question, I’m sure balloon payment implies it’s 30 years amortizing. 

4. So the DSCR's PITI component is based on the payment as if it were a 30 year amortizing loan right? And the 40% down is with the hope it reaches atleast 1.25. The cure to these high interest rates is high cap rates, or higher down. And unfortunately as you must know in the NYC metro you are rarely to going to go higher than 8% cap unless it's in disastrous condition, or a motivated seller.

5. Disappointing to hear 65% LTV for the cash out would be more common. But I guess anything is better than nothing. I'm really only hoping to cash out with $800k on a $1.1M loan. Perhaps the appraisal comes in higher and this target is achieved even at 65% LTV.

6. I'll research what a global cash flow is. Another concern is the massive personal mortgage my father obtained in 2021. Though his gross income has improved substantially on paper from the horror 2020 days I'd still say he's at 25% DTI front end. Up to 38% if just using W2.

7. I will look into pre underwriting. Obviously credit is not going to be pulled right? No soft check? 

Many thanks for your time. Learning more as I go along as I have zero experience. 

Quote from @Corby Goade:

Your dad sounds like he's part of the old school- not an insult, but if you are't getting a Fannie/Freddie loan, pretty much anything is negotiable, especially with PML. 

Commerical loans and LOC are portfolio loans- so, while they typically don't have negotiable terms, banks make up their own rules on how and what they lend on, so get out there and start networking and asking questions.

Best of luck!

Yeah he is old school, but he’s done well for himself sticking to his gut feelings. A Bank loan is generally Fannie Mae right? 

I guess as you suggested have to talk to multiple bank lenders. Possibly up to 5. Won’t reveal cash out plans but just go through purchase scenarios. Or maybe have to be honest upfront? 

When he purchased a house in 2021 we closed in 35 days from offer acceptance to closing date despite the loan being for $3M @2.75% 30 years.  But the process was horrific. 2 lenders who kept giving mixed feelings until they both provided a commitment letter but 10 days apart so went with lender 1. I can’t even describe how tortuous the process was in words. They did make up rules as they went along because lender #3 (we dropped him) cut the qualifying income by 35% based on pandemic k1 losses but lenders #1, and #2 did not count them at all since capital ownership was <20%. All 3 were Fannie Mae “subcontractors” lol. 

A huge worry I have is now that he has a huge personal mortgage how would that even factor into the DTI?

But since is this is my first experience and his 2nd experience better off learning more but making any assumptions. 

Hi everyone,

I'm new to this. I'm helping my father expand his RE portfolio. He's obviously more experienced since he already owns one CRE property.

I have some questions.

He wants to stick to Bank Financing over private lending. His primary mortgage was sold to a private lender in the early 2000s and he claims he had to give an explanation each time as to why he financed with a private lender with such poor reputation every time his credit was pulled. Despite having an 800+ credit score.

Purchase:

He says banks don't offer 30 year loans for CRE. If that's the case is the best hope a 10/15 year loan with 30 year amortization with balloon payment due? Want to put 40% down.

What requirements do banks look for?


How would they calculate DSCR? Based on Noi/Piti derived from the 30 year amortization? Or from the actual 10/15 year loan?

Cash out refinance:

Hoping to get 70% LTV from current strip mall commercial property. 1 unit owner occupied. 30 year term. Does this sound realistic?

Would doing a cash out refinance first to purchase next property hurt the process in anyway?

What would be some common pitfalls in either transaction?

Thanks everyone.

Cash out Refi property located in Northern NJ, and hypothetical purchase mixed use or multi family apartment building located in Brooklyn most likely

Hi everyone,

I'm new to this. I'm helping my father expand his RE portfolio. He's obviously more experienced since he already owns one CRE property.

I have some questions.

He wants to stick to Bank Financing over private lending. His primary mortgage was sold to a private lender in the early 2000s and he claims he had to give an explanation each time as to why he financed with a private lender with such poor reputation every time his credit was pulled. Despite having an 800+ credit score.

Purchase:

He says banks don't offer 30 year loans for CRE. If that's the case is the best hope a 10/15 year loan with 30 year amortization with balloon payment due? Want to put 40% down.

What requirements do banks look for?


How would they calculate DSCR? Based on Noi/Piti derived from the 30 year amortization? Or from the actual 10/15 year loan?

Cash out refinance:

Hoping to get 70% LTV from current strip mall commercial property. 1 unit owner occupied. 30 year term. Does this sound realistic?

Would doing a cash out refinance first to purchase next property hurt the process in anyway?

What would be some common pitfalls in either transaction?

Thanks everyone.

Cash out Refi property located in Northern NJ, and hypothetical purchase mixed use or multi family apartment building located in Brooklyn most likely

Hi everyone,

I'm new to this. I'm helping my father expand his RE portfolio. He's obviously more experienced since he already owns one CRE property.

I have some questions.

He wants to stick to Bank Financing over private lending. His primary mortgage was sold to a private lender in the early 2000s and he claims he had to give an explanation each time as to why he financed with a private lender with such poor reputation every time his credit was pulled. Despite having an 800+ credit score.

Purchase:

He says banks don't offer 30 year loans for CRE. If that's the case is the best hope a 10/15 year loan with 30 year amortization with balloon payment due? Want to put 40% down.

What requirements do banks look for?


How would they calculate DSCR? Based on Noi/Piti derived from the 30 year amortization? Or from the actual 10/15 year loan?

Cash out refinance:

Hoping to get 70% LTV from current strip mall commercial property. 1 unit owner occupied. 30 year term. Does this sound realistic?

Would doing a cash out refinance first to purchase next property hurt the process in anyway?

What would be some common pitfalls in either transaction?

Thanks everyone.

Cash out Refi property located in Northern NJ, and hypothetical purchase mixed use or multi family apartment building located in Brooklyn most likely

Hi everyone,

I'm new to this. I'm helping my father expand his RE portfolio. He's obviously more experienced since he already owns one CRE property.

I have some questions.

He wants to stick to Bank Financing over private lending. His primary mortgage was sold to a private lender in the early 2000s and he claims he had to give an explanation each time as to why he financed with a private lender with such poor reputation every time his credit was pulled. Despite having an 800+ credit score. 

Purchase: 

He says banks don't offer 30 year loans for CRE. If that's the case is the best hope a 10/15 year loan with 30 year amortization with balloon payment due? Want to put 40% down.

What requirements do banks look for?


How would they calculate DSCR? Based on Noi/Piti derived from the 30 year amortization? Or from the actual 10/15 year loan?

Cash out refinance: 

Hoping to get 70% LTV from current strip mall commercial property. 1 unit owner occupied. 30 year term. Does this sound realistic?

Would doing a cash out refinance first to purchase next property hurt the process in anyway? 

What would be some common pitfalls in either transaction? 

Thanks everyone. 

Cash out Refi property located in Northern NJ, and hypothetical purchase mixed use or multi family apartment building located  in Brooklyn most likely.