All Forum Posts by: Darryl Dahlen

It's too hard to predict what will/could happen in your scenario as there are a lot of varaibles in play. Did the SBA attach any of your home equity? Do you have pledged assets or collateral? How about a co-signer?

As mentioned, you really need to talk to your servicer to see where their temperment is at with this sort sceario.

Plenty of lenders change terms, for better and worse, to match the risk associated with the loan. The lender can be a bank, agency lender (Freddie/Fannie, SBA, or HUD, etc.), or a HML. In fact, the practice is quite common in this market. Perhaps not so much in the residential sector, which I am curious to know if it is, but it happens in CRE.

Now, I'm not saying a lender should be a "bait and switch" operation. I don't agree with that, but there's also nothing wrong with adjusting the terms of a loan as the facts present themselves. This is one of the ways a lender mitigates its risk.

I've seen terms improve on a loan if an appraisal comes in high or if the payoff is lower than expected, but I've also see terms deteriorate if an appraisal comes in low or there are issues with credit, assets, etc.

That doesn't make the lender a shark. Not if the reason(s) to adjust the terms are valid.

I don't have any direct experience with them, but I think I'd spend some more time looking for a different lender.

Only reason I say this is that I believe if you spend some time developing contacts that you'll be able to find a residential HML who won't charge upfront fees.

Personally, there's just too much negative press on the web regarding them charging fees for my comfort.

If it helps, I'll send you the contact info for a HML lender in MI that may be able to help you. I'm not affiliated with them in any way and am not looking for compensation. Just happy to help if I can.

Interesting thread.

I would think one of the challenges will be offering terms that you can make a good return on, but were they're not so oppressive that you force the borrower to refinance as soon as they can.

That, and if a commercial property can afford to service the debt with hard money terms over the long-term then the reasons why the borrower would need hard money would mostly be due to borrower issues (credit, income, etc.)

You're OK as long as those issues remain in play, but I would think most borrower would look to remedy whatever shortfalls they have to seek conventional financing ASAP.

That said, I believe that while you may not retain too many notes over the long haul you can no doubt find short to med-term success with this.

Have you tried talking to your neighobor first? Wouldn't that seem the logical first step?

You may be able to rectify situation without having to file any complaints.

If you really want/need to collateralize the property in lieu of a down payment then the offer isn't too bad.

I don't know as I'd be crazy about the floating rate in 5 years. No doubt you can refinance after a couple years to lock in a longer, fixed-rate loan once you can use the appraised value.

What's the PPP on their offer?

100% financing in the CRE arena is usually the stuff of scammers who prey on the desperate and inexperienced. On the debt side of the coin anyway.

When combined with a seller second, HUD can provide the highest conventional debt leverage, but even, it isn't 100% financing. Not to mention, those loans are for larger projects/loan amounts with experienced borrowers who have deep pockets.

You already have a grasp of what most banks are offering so no need to rehash those numbers.

As LOC stated, you can sometimes find a private investor to provide the needed funds for a higher return or a good chunk of equity, or both. I believe in most cases even a private investor would want to see some skin in the game or for you to contribute a service such as property management. Otherwise, why would they need you?

Also, it is worth mentioning that for a lot of CRE deals you will also need to have reserves in addition to the down payment.

What Nathan said.

As Jon has pointed out, there are banks/credit unions who have CRE loan programs for loans in the 500k and below category.

Your income and credit are good so that won't be an issue, but your inexperience as a landlord could be a problem for some lenders. That can sometimes be offset with the use of a good management company, though.

What kind of down payment do you have? If you were to approach me, I'd tell you to have 30% to put down as well as have 6 months reserves (mortgage and insurance payments) on top of that.

Of course, the property must be above board as well, and by that, I mean it needs to debt service the loan, have a stable occupancy level, good tenants, no large deferred maintenance issues, etc.

What Joel said. These types of properties are hard to source directly from a bank. Either because the asset manager has gate keepers in place to keep the dreamers away (not saying you are) and/or the bank lists the properties with realtors and only accepts offers through them.