All Forum Posts by: Tim Milazzo

Hi @Bill Cippola. On the commercial side, lines of credit are out there, especially if you've banked with the same institution for a while and they have a sense of your strategy. But it's not nearly as common, cheap, or as easy to execute as simply getting a first mortgage on the property.

 There are also some private lenders that provide loans against your equity - but the pricing is much higher, in the 12-16% range, vs 3.5-5.5% for a first lien against the property.

If you are free and clear, your first look should always be toward the property's capital stack directly, as that is the most economical.  

Here's the link to watch live on Youtube next week: https://www.youtube.com/watch?v=iEZjNHQAg8w

It's no secret: industrial has heated up - occupancy is up, prices up, and cap rates are down. Growth in e-commerce and the shift to a more on-demand economy are just some of the drivers behind the increase in demand.

Look, we don't like webinars much. But we can't invite you to our office in person right now, and there's some valuable information about the Industrial market that we'd like to share. We promise it will be shorter, and less boring, than most of the other webinars you are ignoring.

Join us on an online webinar moderated by Tim Milazzo, StackSource CEO with Jon Karnick, Principal of Assurance Realty Group, and Greg Heaps, the Chief Marketing Officer of Chunker.

There are exceptions to every rule, so getting to the *right* lender in commercial real estate is key.

The rule for 5+ unit multifamily properties is "don't house hack", i.e. rent or use one of the units to live in yourself. It lowers the NOI, and makes it a riskier underwriting because the DSCR is hampered.

At this property in Los Angeles, the property owner is keeping not one, but TWO units back for their own use, which is 33% financial vacancy. Definitely breaking the rule!

My StackSource teammate Huber Bongolan arranged long-term, fixed rate debt at 4.75% on the property anyway. How?

The *exception* to the rule is that the property was in Beverly Grove, where rental demand was strong enough for an entrepreneurial bank to get comfortable with a loan at 1.00x DSCR (break even), knowing that those two units could be rented out if they had to be.

Work with experts in commercial real estate. They know the rules, but more importantly, they know the exceptions!

Hey @Kevin Boyd - life insurance companies are a major "food group" of the commercial mortgage scene. They typically prefer conservative bets (low LTV) on long-term, cash-flowing assets with strong, experienced borrowers. The actual loan parameters will differ by company just like they differ from bank to bank, but loans from life insurance companies have some of the lowest rates around - think mid 3's today. Most life insurance companies do not accept direct contact from end borrowers, forcing them to go through qualified intermediaries.

Hi Cathy - depends on the collateral. Is it multifamily? What's the approximate value? How much cash flow?

StackSource is a new breed of financing platform for commercial real estate. We're growing nationwide and need real estate finance experts to join us as Capital Advisors! If you have experience in commercial real estate lending, underwriting, and investment, check out what StackSource is doing to streamline the commercial financing process, and how you can help us expand faster.

Hi @James Green,

First off, welcome to BiggerPockets! I noticed it was your first post, but I'm sure you'll be shedding your own advice here later.

 Assuming the total project cost at $2 Million, and your ability to put down $200k, you're absolutely going to run into a problem with this plan. The relevant metric to compare those two is Loan to Cost (LTC), and with a $1.8 Million loan on a $2 Million project, you'd be asking someone for a 90% LTC loan. Commercial loans that high are absolutely considered risky. Technically, a bank can do it with the SBA 504 loan program, but then they'll be underwriting to make sure there are no other significant risk factors, or else even the government guarantee of the SBA portion won't be enough to satisfy them. Unless I'm missing something, there are several other risk factors present:

1. First Time Buyer
2. First Time Builder
3. Collateral currently holds little value (raw land)
4. Net Worth of sponsor (borrower) much less than loan amount
5. Liquidity of sponsor (borrower) after equity contribution is negligible
6. Inexperienced business operator
7. No history of profits in the same business

I don't want to crush your dreams, but this deal will be a No from every bank I've ever heard of. I think you should come to terms with that quickly, rather than travelling around pitching all of these banks and having your hopes dashed again and again.

What you really need on this project is more equity (perhaps from a rich uncle or a friendly local investor), an airtight business plan, and then probably a private lender that gives you the benefit of the doubt in getting started with the business.Bank-rate financing will almost certainly be unattainable until you've shown that the business can drive a profit. Or, bring in an equity partner that eliminates some of those risk factors that would sign on a loan with you.

@Kyle Charles - shoot me a DM and let's talk about your specific situation.

I don't see you "locking in" any legitimate commercial lender in one business day. Why the fire drill?