All Forum Posts by: Paul Klei

I need lenders who will work with the structure I'm seeking. I provided the numbers, I don't think it's wise to give away the location of the properties. I'm happy to provide those details to a lender privately. 

A lender makes money from interest. They underwrite risk according to a property's ability to cover the debt service, rather than qualifications of the borrower. The property is collateralized to further lower risk. So, as I stated in my post, these deals have high DSCR and a low LTV requirements. That's the definition of a good deal.

Hopefully the properties he's looking at are income-producing and the NOI can carry the debt service, etc. Lenders look at DSCR, debt service coverage ratio. DSCR = NOI divided by the amount due to the lender/seller. If the NOI is 100,000 and the debt service is 50,000 then the DSCR would be 2, meaning that the property makes twice as much as necessary to cover the payments.

Several hard money lenders have confirmed to me that as long as the purchase price (or down payment presumably) is below their LTV threshold, then the purchase would technically be 100% funded. Any experience with / idea about the feasibility of that?

I've got several active projects: multifamily, motels/hotels, self-storage. Solid NOI and DSCR. Could handle aggressive interest rates. Easy to add value and refinance/cash out. Properties either have or will have 3rd-party management.

Example: 

Hotel

Keys: 49

NOI: 278k

Asking: 2,650,000 - 40% down

Loan amount: 1,060,000

DSCR: 2.62 at 10%, 1.31 at 20%

Flag: Unflagged but green light from Motel 6, Super 8 and Best Western.

Value add: Bring rack rate to market. Flag. 

ADR, revpar: N/A off the top of my head.

I've had a few lenders show interest but they are slow to respond and I don't know whether they are reliable. It's been confirmed to me that if the purchase price is under their LTV threshold (the hotel above would be 40% LTV), then the purchase would technically be 100% funded - that's the structure I'm presently seeking*. I've got brokers on the line who have persuaded their clients to lower their asking to a certain LTV, or, sellers offering owner financing. In that case I would just need the down payment to be under the lender's LTV, and the seller would be in the junior position. I've seen the financials and I've done the negotiating. I need reliable hard money lenders to jump on these turn-key deals. I'm more concerned with acquisition than with personal cash flow, so I only need the NOI to be able to service the debt, at whatever interest rate gets the deal done, with enough spread to also pay the seller if necessary. I'm also willing to give preferred equity. *I've been in real estate for+/- six years, working exclusively with land. That had been my sole income. Last year I had multiple breaches of contract that lost/cost me a lot of money. Funds are allocated to attorneys and care for elderly parents. Capital is tight and credit has suffered. So I'm looking for true hard money financing underwritten exclusively to the property.

I've spoken to a few lenders who confirmed that if the purchase price is under their LTV threshold, then the purchase would be 100% funded. Any experience with that? I've got a few brokers on the line who have persuaded their clients to lower their asking to a certain LTV, or, sellers offering owner financing. So I would just need the down payment to be under the lender's LTV, and the seller would be in the junior position. I just need to find reliable hard money lenders to help me jump on these deals.

I've spoken to a few lenders who confirmed that as long as the purchase price is below their LTV threshold the purchase would be 100% funded. That's the structure I'm looking for. Any experience with that?

They've agreed to a base rent + revenue sharing, but they won't do an annual escalation as well. It's one or the other because "inflation will level off and if we enter a recession, it may even decline." Of course inflation will level off but it will not drop to zero, certainly not for a 75-year lease term. Between 1960 and 2022 it went up 903% overall. I'm trying to determine if base rent with a revenue share will account for inflation, or if I need to push for an escalation clause. If inflation goes up, prices go up, their revenue goes up, and my revenue goes up. But if somehow their revenue does not go up, my revenue is set at the base rent, without escalation and no additional revenue check, and inflation eats away at the base rent.

 What language is used in your lease? Something like "Lessor is entitled to any revenue above and beyond base rent, totaling and not to exceed 20% of Lessee's gross revenue"? 

Would you mind elaborating on this? What is the revenue share that you would receive if base rent was breached? How is yours structured? If, for example, your base rent is 20%/$5000, and years later 20% is worth $10,000, do you receive a revenue check for the extra $5000?