commercial building - loan | TigerDroppings.com

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oldschoolgreats
LSU Fan
Member since Nov 2012
1248 posts

commercial building - loan


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

thanks







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Tigerpaw123
USA Fan
Louisiana
Member since Mar 2007
9145 posts

re: commercial building - loan


1-5 yes

other - your personal income and savings...IE how long could you make it if you lost some tenants

overall condition of bldg...will repairs need to be made soon?

don't be surprised when they come back with a 10 year term, or a 3 year with a balloon







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oldschoolgreats
LSU Fan
Member since Nov 2012
1248 posts

re: commercial building - loan


10 year term would probably be ok for starters. refi later. 3 year is a no go.





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Tigerpaw123
USA Fan
Louisiana
Member since Mar 2007
9145 posts

re: commercial building - loan


usually it is a 3 year term, with a monthly note based on a 10-15 year Amortization, with a balloon note at the end that they would then re fiance





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TigerHunt
LSU Fan
Covington
Member since Feb 2005
19 posts

re: commercial building - loan


What market is the building in?





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tigerrocket
LSU Fan
Member since Aug 2008
90 posts

re: commercial building - loan


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.





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bryso
Clemson Fan
The Real Death Valley
Member since Dec 2006
27069 posts

re: commercial building - loan


Id hate to buy something knowing i would have a rate adjustment in 3 years. Gonna get the short end of that stick





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JMTIGER85
LSU Fan
New Orleans
Member since Dec 2006
541 posts

re: commercial building - loan


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.






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Alltheway Tigers!
LSU Fan
Baton Rouge
Member since Jan 2004
3083 posts

re: commercial building - loan


6. Other

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?







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oldschoolgreats
LSU Fan
Member since Nov 2012
1248 posts

re: commercial building - loan


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.






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Tigerpaw123
USA Fan
Louisiana
Member since Mar 2007
9145 posts

re: commercial building - loan


quote:

will the bank ask for any personal guarantees from me


I would be surprised if they did not require a personal guarantee






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rlp
LSU Fan
Shreveport
Member since Sep 2005
386 posts

re: commercial building - loan


quote:

will the bank ask for any personal guarantees from me


If they don't, please give me the name of your bank and banker. I will be willing to take much greater risks if only 20% - 25% is at stake.



This post was edited on 11/13 at 10:23 am


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oldschoolgreats
LSU Fan
Member since Nov 2012
1248 posts

re: commercial building - loan


good info. how long will it take from the first time you talk to a banker until the money is available to you?





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rlp
LSU Fan
Shreveport
Member since Sep 2005
386 posts

re: commercial building - loan


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.





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TigerHunt
LSU Fan
Covington
Member since Feb 2005
19 posts

re: commercial building - loan


If your building is located in the St.Tammany or New Orleans market. Give me a call 985-612-3208. I may be able to help with your financing.





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oldschoolgreats
LSU Fan
Member since Nov 2012
1248 posts

re: commercial building - loan


not in that area but thanks.





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