All Forum Posts by: Tim Milazzo

Hi Vincent - what is the value of the building? Non-recourse loans less than $1 Million are exceedingly rare.

The way most developers handle the situation is purchasing the land all cash, or with a bridge loan, then shopping for the best construction loan once the project is shovel-ready. I would consider all cash first, for a couple of reasons:

1. If you're competing against another buyer, closing all cash quickly can earn you bonus points with the seller, vs a buyer with a financing contingency.

2. If you can't afford to take down the land all cash, can you really afford the full development of the property, which will likely be a much higher cost? Free and clear land can be your equity against the construction loan.

In the cases where you don't have the cash ready to take it down, a bridge loan will be faster, and more flexible to pay off, than a bank loan. You'd only be paying interest, so though the rate is higher, it is not "more expensive" to make payments in the short run. And you take out the bridge loan with the construction loan once approved.

Commercial financing guy here - how can certainly get a commercial loan on the property now based on the existing building and cashflow, but you will not be able to tear down that building that serves as collateral until you pay it off. So if your plan is to tear it down in a couple of years, you'll want to use:

• A bridge lender that puts out short-term money. Pros: fits your timeline. Cons: More expensive, usually high-single digit rate and a couple of points origination.
• A long term fixed rate lender that has no prepayment penalty. Yes, these exist, and no, it's not your typical local bank.
• A bank that can lend on a 3 year fixed term. These are plentiful and easy to find, but the 3 year term is more rigid, because it locks in your timeline to refinance with that construction loan, regardless of whether your plans are ready and approved.
• A floating rate loan from a bank or other perm lender, which are more flexible to prepay. Pros: more flexible prepay. Con: Interest rate risk (though rates are currently declining).

Hi Joe - it sounds like this property may be a candidate for a Bridge Loan if you have a strong business plan and can demonstrate market demand. Bridge loans are typically I/O (interest-only), which means you won't be paying down principal, only interest. They are more expensive than your typical bank loans (usually 8-12%), but give you the flexibility to work a business plan that does not include initial cash flow.

Once you tenant the property and establish cash flow, you'll then be able to refinance into lower cost debt based on the rent roll and NOI.

In the meantime, here's the typical checklist in order to qualify for a bridge loan: https://www.biggerpockets.com/member-blogs/9562/80403-checklist-how-to-land-a-commercial-bridge-loan

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Yep - fixed rate periods of 5, 7, or 10 years are most common. You'll rarely see a lender lock in a long term loan (like 30 years) in commercial, and when you do it's super expensive.

Hospitality in real estate has always come in a few variations: full-service hotels, limited-service hotels, motels, hostels, bed & breakfasts, and a few others.

But these days, we’re seeing hospitality increasingly grow beyond an asset class, and become a recurring theme across all the traditional real estate categories. This event will focus on ideas from hospitality crossing over into multifamily, and the new business models within the asset class, particularly co-living.

Join us in Newark for drinks, networking, and a fireside chat with Sterling Jawitz, early employee at Common Co-living, a top co-living brand.

Venue: Newark Venture Partners is a venture capital firm investing in early stage B2B tech companies, and is located at 1 Washington Place, just steps from the Newark Broad Street train station, a 15 minute trip from Manhattan.

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@Alina Trigub - whoops, thanks for catching that! It won't let me edit the original post, but here is the correct link: https://www.stacksource.com/join-us

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