commercial building - loan(Posted by oldschoolgreats on 11/12/12 at 1:22 pm)
new to the board. I need a little help from you guys. Trying to get a loan to purchase an office bldg. for rental purposes. will be able to put down 20% - 25%. building is currently 100% occupied. loan amount would be about $850,000. This will be my first time trying to get a business loan.
what do you guys think will be the most important factors (in order)in trying to get this loan:
1. amount of equity I put in deal. 2. my credit score/quality 3. fair market value of prop. vs. costs 4. cash flow generated by property 5. duration of current lease contracts 6. other
If 1-5 are good, you should be able to get a 20 year amortization with a 5 to 7 year balloon. Owner-occupied is much easier loan to get done. I just did an owner-occupied commercial and got a 15 year amortization and term with no balloon.
I underwrite commercial deals for a living. Mostly middle market, but do have some CRE.
1- Very important, you won't be able to put down any less than 20, but preferably more 2 - Not really that important. Just puts more stock in to the kind of person you are. 3 - Yes, your appraisal is what the loan will be based off of. The bank will only lend you 80-75% of appraised value, and the value of the appraisal will be reviewed for the bank's approval. Most banks have a list of appraisal companies acceptable. 4 - MOST IMPORTANT after your appraisal and equity position meet requirements. 5 - Rent rolls are important 6 - Quality of the tenants, history with CRE, your financial support to carry things if they go bad. Also, see if you are dependant on any one tenant, and if you can sustain any loss of rental income and still service your debt.
That’s all I got off the top of my head. Good luck.
Do you know what the hell you are doing? Blunt and to the point.
If this is your first property of this type or first CRE property, a bank might require more equity.
Don't forget to sell yourself and your abilities to do these types of projects. Tell the bank you are considering future deals and looking for a banking relationship.
Be creative as you can on structure. If you don't ask, you won't receive. If you want a longer maturity to lock in payments, be expected to pay higher rates. Perhaps offer the bank a one-time rate adjustment (in the bank's favor) in exchange for a 5 year (or longer...) balloon based on a 15-20 amort?
thanks guys. lots of good information. I own a small set of apartments but have no commercial experience. I personally know the seller and the property and have a good understanding of how the property is rented and maintained etc.
the property has significant cash flow and numerous tenants (not one or two major tenants).
under these circumstances, will the bank ask for any personal guarantees from me or will the upfront equity and property liens be all the bank needs.
Depends on a few things, like how long it takes to get appraisal, setting up with closing attorney, etc. but my experience is 4 - 6 weeks. Being that this is your first time and with no established banking relationship, probably longer rather than quicker.