Need advise on commercial financing

Commercial Real Estate Investing
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Need advise on commercial financing

Raj Kumar
Investor · Herndon, VA · Member since 2012 · 40 posts · 1 vote

I bought a commercial building 7 months back in an auction for 240k(all cash). Now the building is fully rented and has positive cash flow of 2500$/month. But all the banks I have talked to so far(both big and community banks) are telling me they will only lend 70-75% of the purchase price not the appraisal value which I think will be close to 400k. At 5.25% interest rate I can easily make payments on a 300k loan, but no one's offering me more than 180k.

Please advise if there's any other way to take out 70% of the appraisal value other than selling the building...

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    Hi Raj,

    What type of commercial property is this?? (Hotel, multifamily, office, industrial ,etc.)

    Banks are going to do vanilla stuff. There are specific asset lenders that will have the best programs for this type of thing because it is all they do. It seems to me you need to look for a specialist lender relevant to the specific commercial asset type you turned around.

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  • Raj Kumar
    OP
    Investor · Herndon, VA · Member since 2012 · 40 posts · 1 vote
    13y

    It's a Industrial building 1/3 office space and 2/3 ware house. I have talked to the community banks, most of them don't even want to touch it as it's non owner occupied and I live out of state.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y

    This is pretty much a local bank deal, the rule still applies the lower of cost or market within one year, after one year they lend off the market value. This isn't big enough to go to Prudential Commercial Financing or such. Small specialized lenders will usually have higher rates as well. O/W isn't so odd to finance, motels, churches, private schools or resorts are unusual enough to draw specialized lenders. Wait out the year and try again with local lenders, local to the property.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    13y

    Raj you will need to post in the Marketplace if you want lender recommendations. That's not allowed in discussion forums.

    A deal I'm in did a refi on a mini storage last year. The lender looked at the last FIVE years operating data to determine a value. Unfortunately, weak years in 2007 and 2008 lowered the value. I think you need to plan on holding this quite a while before you can refi.

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