All Forum Posts by: Darryl Dahlen

Thanks for the vote of confidence Bryan. A 30 year fixed CRE loan is atypical of what lenders usually offer. A lot can happen in 30 years so lenders tend to shy away from locking in a rate on a commercial property for so long. As such, most lenders offer 5, 7 or 10 year loans with either a 25 or 30 year amortization. In most cases, rates are usually better on these loans since the lender's risk is mitigated via the shorter term.

That being said, you can indeed find loans that come with long(er) terms. Fannie, Freddie, and HUD offer longer fixed-rate loans with HUD offering a 35 year term. All of these programs are geared towards a sophisticated borrower with significant multifamily experience, net worth, and larger loan amounts. Although, Fannie has a small balance product for loans in the 1-3MM range. LTVs allow for 80-83% financing. All agency loans are non-recourse.

On the conventional side, there are some bank, credit unions, and CMBS lenders who offer 30 year options. As mentioned, the rates can be less attractive so you need to take that into consideration.

For most people, they would rather opt take a 10/30 loan to get a better rate in order to improve their cash flow, but there are some who prefer the comfort of locking in a rate for as long as possible knowing they're not going to sell.

You can also expect to put down more money. Outside of the agency loan programs, the going LTV on multifamily loans is 65-75%. Market, property condition, historical financials, and borrower experience/financial strength all play a role in what the LTV will be.

I'm a multifamily guy by trade so if you'd like to talk please feel free to reach out to me.

Personally, I think a lot of it boils down to if a broker can hold an intelligent conversation as to the loan process, required documents, what the lender charges and when, etc.

Anyone who has been in the CRE finance sector for any amount of time should be able to talk with a reasonable degree of confidence, and knowledge, about whatever they're offering.

The loan process, and requirements, differ from program to program. What borrower can expect for an SBA loan is different than the process/docs required for a hard money loan or say a church loan.

A knowledgeable broker should easily be able to impart their knowledge as to how a particular lender and/or loan program works or what the current market appetite is for a particular property type is.

That, and a good broker should be willing to spend the time and work pro bono while they approach lenders. I don't agree with a broker charging upfront fees at all. If that occurs, I'd suggest a borrower to look elsewhere.

For most of the upfront fee collectors there is very little transparency. To me, this is a huge red flag. There are still a lot of term sheet factories who will spit out bogus terms with no real interest in actually funding a loan. Some are lenders, and some are brokers who are acting as a correspondent, and sadly, some are banks, too.

Still, it's up to a borrower to ask the right questions as any salesperson, and that goes for banks as well, can make a used clunker sound good if left unchallenged.

For me, it's very important to know what a lender I'm submitting deals to is funding, what they're thresholds are, and who I'm dealing with. As a borrower, it's important to know this so ask as this information can go a longs ways in preventing headaches down the road.

For instance, just because a bank my close SBA loans doesn't mean they'll fund every single deal that is an SBA candidate, has PLP status with the SBA, or doesn't impose their own overlays that superscede what what the SBA will allow. All of that can make a huge impact on the loan.

This also applies to knowing what terms are, and are not possible, how the process works, and of course, what the fees are. All of which a broker should know and a bororower should ask.

Ideally, once a fee agreement is signed, a good broker should disclose who the lender is. If they're not willing to that is a also a huge red flag.

Overall, I believe if a borrower focuses on obtaining a level of comfort that is based on knowledge and transparency first and foremost that that can eliminate a lot of the riff raff.

Good grief, were they also asking for points at closing on top of that?

Josh- there has always been a lot of "fluff" in the CRE funding space. A lot of it is naive residential brokers who beleive anything they hear and think they can make a life changing paycheck on every deal so they promote bogus programs and or "lenders".

There's also the dedicated con artist who is only interested in trying to secure an upfront fee. These come and go, but as of late, I've seen a huge increase on the internet that are scammers based in Europe. Of course, there's also the Nigerians, but they're easy to spot due to the badly written proposals that usually come with offers of 2% financing, lol.

I don't know how people fall for these scams, but like anything, there are people who are so desperate for money that they'll unfortunately take a chance on the slim-to-none option versus no option at all.

The reality of the matter is that CRE lending is still very, very hard.

My father used to say, "Live your life in a such a way that you are happy to see a police officer."

I just visited it the other day. It's a great looking site and is a prime example of how a site can be very basic yet professional. Personally, I love the photos of the projects they've done.

Here's a link for those who want to take a look: http://www.kandvinvesting.com/

Just put a multifamily deal in UW where they're getting 3.90% on a fixed 10/30. They could have chosen a 30-year fixed rate of 5.15%, but they wanted a lower rate

I also have a SBA term sheet for a self-storage facility where they are being offered 5.75% on a 25-year fully amortizing loan.

Good topic. Another factor that I've found to be important, and one that can really impact the underwriting process/timeline, is if the lender uses its own funds or if it is comprised of investors.

The fewer layers of approval there are the better!

Short of the rare situations that Brian describes there is no such thing as no money down when dealing with CRE.

Granted, there are times where a person can enter into a deal with no money of their own, but those are almost always situations where that person has a critical skill (management, contractor, etc.) and have financial partners who are kicking in the needed capital.

Oh, and to add to what Joel said regarding TD Bank. I too don't see anything wrong with their offer to you Brian. I don't think you'd find much better anywhere else, and while TD Bank is somewhat conservative, they've weathered the economic storm we're in very well by being just that.

I agree with Dion and Bill on the LTV. You should plan on contributing about 30-40% of the capital needed as well as personally guaranteeing the loan.

Strip malls aren't an asset class the lenders will be aggressive on. Even if it is stabilized, but especially so if there isn't a long-term anchor in place.

So, a lender is likely to mitigate its risk by offering a short-term loan with a low(er) LTV not only to hedge against vacancy rates, but declining values as well.

By investing out of state you can no doubt find larger properties where you can get "more bank for your buck".

However, I wouldn't I'd suggest that your first multifamily property be one far away. Isn't part of what you bring to table your management experience? That becomes somewhat diluted if you now have to let a PM company manage your property that's too far away for you personally manage.

Also, keep in mind that for the properties you'll be able to buy you'll need cash-reserves. If neither of you have additional liquid reserves you will need to save some of that 300K. Figure 6-months worth of PITA.

Lastly, you didn't mention your credit score. If you plan on being partners, you need to know that a bank will be looking at BOTH of your tax returns, assets, and credit.