All Forum Posts by: Mike Garland

 Take the scenic route!

Julie,

If you are looking for answers to your questions, my advice would be to start listening to the BP Podcasts (if you haven't yet).

These are questions that are usually covered in each one.

Hate for your thread to become a list of horror stories that scare you away, lol.

1) Yes

2) Local community banks

3) Balloon means the loan is maturing and there is still a balanced owed.  Amortization in simplistic terms for this discussion:  20 year amortization means they are basing your payment amount on a 20 year term.  So with a commercial loan with a 5 year balloon (maturity) and a 20 year amort you will be making payments as if you have a 20 year loan but it matures in 5 years so there will be a balance left.  You either need to pay it off, renew it or refinance it.

4) Most banks want you to have your own money into the deal.  Sometimes they will allow 15% of the down payment to be cash from you, leaving 5% for owner financing if the bank is financing 80%.

I definitely agree with the other posters on this thread that you still have some learning to do.  Hopefully we have helped in that.

@Andrew Elmasri

1) a. Hard Money - quicker time to close, may finance a larger portion of the cost.  Hard means they are lending based on the collateral - looking for good equity.  More than likely they will not require you to provide a mountain of financial info (tax returns, personal financial statements, etc).  

b. Commercial - longer process, lots of requirements with in-dept underwriting on your ability to repay.  Commercial real estate lenders look for for cash flow as the primary repayment source, not equity in the real estate, though that is important.  Rates are much better than Hard Money and their terms are usually better and longer.  Fees are less.

2) Seller financing terms/rates:  Whatever the seller decides.  Typically see the seller financing with 1-5 year balloons on 10-20 year amortizations.  Rates vary, again whatever the seller is good with.   For paperwork, you need to consult a real estate attorney and have them draft the loan documents.  Recommended using title services too.

3) For what type of loan?  

@Mike Hartzog

Thanks again for the advice.  The Affidavit of Lost note was the way to go.  Attorney agreed and we had one drawn up.

Just closed on my first note purchase today!  

Appreciate your input.

Where a lot of people get confused with commercial bank financing is the difference between cost and value. In an acquisition, the bank will lend you based off of a % (usually 75%) of Loan to Cost (LTC) or Loan to value (LTV) - whichever is LESS.

So, you buy a property for $100k, it appraises for $140k.  Bank is basing their loan off 75% of the $100k, so a $75k loan.

You buy a property for $100k, the appraisal comes back at $90k.  Bank is lending you $67,500 (75% of value).

Hope this helps

Alta Vista is a decent neighborhood.  I would say the best houses are right in the middle of the neighborhood, between Fulton and Woodlawn.  Properties closer to the north boundary which is Hildebrand start going a bit downhill.   South of Woodlawn as you get closer to San Pedro creek is going through some revitalization but there are plenty of shabby properties.   The west boundary are the railroad tracks, so make sure you factor those in as you are looking at properties.

I looked at a house off French which is near San Pedro Park.  They were asking $110/sf.  I like being close to the park so I went to check it out.  It needed a lot of work and was three properties down from the tracks.  Two properties down from this house along side the tracks was a metal shop...

Overpriced and noisy neighbors...no thanks.

My question is:  Why would you finance a borrower like this?  I understand mitigating factors on a divorce, but your borrower was in default.   I know you did not really go into much detail but on the surface this seems like a very risky investment at 7%.

Were they on a short amortization that was killing their cash flow?   Guess I can see how taking it to 30yrs would help out...

Curious on how many controls you put into place to make sure those payments are coming in.

Asking because I like to give alternative options to borrowers that do not qualify for a traditional commercial loan.  Perhaps I could send them your way.

My advice will be to make sure you really understand where the actual high growth areas end and the warzones begin.  Sometimes is just a block apart.   Do not count on marketing pieces on for-sale properties - according to them, they are all in high growth areas...

If you have identified an area in town, reach out to the BP San Antonio community and get their input.

Absorb those BP Podcasts!