From the BiggerPockets Blog

 BiggerPockets Blog »

Jump to Forum View All

Click a category below to view different forum categories.

BiggerPockets

General Info

BiggerPockets Q&A, Site Questions, & Announcements

1518 topics, 14424 posts — Last Post 04/20/14, 06:23PM

BiggerPockets Exclusive PRO Area

118 topics, 842 posts — Last Post 04/20/14, 04:40PM

New Member Introductions

10904 topics, 85798 posts — Last Post 04/20/14, 06:59PM

Real Estate Success Stories

396 topics, 6162 posts — Last Post 04/20/14, 01:05PM

General Real Estate

General Real Estate

Buying & Selling Real Estate

5950 topics, 46902 posts — Last Post 04/20/14, 06:29PM

Renters

644 topics, 5822 posts — Last Post 04/20/14, 10:45AM

Get Foreclosure Help - Help Stop Foreclosure Forum

316 topics, 2557 posts — Last Post 04/16/14, 03:58AM

Home Owner Association (HOA) Issues & Problems Forum

237 topics, 1609 posts — Last Post 04/17/14, 08:53AM

Do it Yourself

657 topics, 6295 posts — Last Post 04/20/14, 06:47PM

Reviews & Feedback

Real Estate Deal Analysis and Advice

3686 topics, 29550 posts — Last Post 04/20/14, 06:11PM

Real Estate Guru, Book & Course Reviews and Discussions

1134 topics, 11564 posts — Last Post 04/20/14, 08:34AM

Ask About A Real Estate Company

741 topics, 7327 posts — Last Post 04/20/14, 05:47PM

Real Estate Investing

Real Estate Strategies

Wholesaling

5609 topics, 43772 posts — Last Post 04/20/14, 06:03PM

Rehabbing and House Flipping

3336 topics, 31019 posts — Last Post 04/20/14, 06:19PM

Real Estate Development & New Home Construction

553 topics, 4686 posts — Last Post 04/20/14, 12:11PM

Innovative Strategies

704 topics, 6030 posts — Last Post 04/20/14, 10:54AM

Tax Liens, Notes, Paper, & Cash Flows Discussion

866 topics, 6678 posts — Last Post 04/19/14, 06:06AM

Rent to Own a.k.a. Lease Purchase, Lease Options

695 topics, 4909 posts — Last Post 04/20/14, 05:32PM

1031 Exchanges

143 topics, 1054 posts — Last Post 04/18/14, 08:41AM

Foreclosure Investing

General Foreclosure & Pre-Foreclosure Forums

1688 topics, 11298 posts — Last Post 04/20/14, 01:58PM

HUD, VA, and Tax Sales

415 topics, 3097 posts — Last Post 04/19/14, 10:19PM

REOs

1214 topics, 10578 posts — Last Post 04/20/14, 12:34AM

Short Sales

1535 topics, 13121 posts — Last Post 04/20/14, 02:17PM

Landlord & Tenant Forums

Landlord & Rental Property Questions

7214 topics, 70824 posts — Last Post 04/20/14, 06:48PM

Mobile Homes & Mobile Home Park Investing

638 topics, 5141 posts — Last Post 04/19/14, 09:49AM

Investor Basics

Starting Out

7712 topics, 60528 posts — Last Post 04/20/14, 06:23PM

Investor Psychology

431 topics, 6107 posts — Last Post 04/20/14, 06:04AM

General Real Estate Investing

4719 topics, 37223 posts — Last Post 04/20/14, 04:47PM

Real Estate Investor Marketing

1732 topics, 14098 posts — Last Post 04/20/14, 05:20PM

Commercial Real Estate

Commercial Real Estate Investing Forum

1410 topics, 8994 posts — Last Post 04/19/14, 04:34PM

Multi-Family and Apartment Investing

1110 topics, 9246 posts — Last Post 04/20/14, 06:21PM

The Business of Real Estate

Real Estate Technology and the Internet

Real Estate Technology, Social Media & Blogging

641 topics, 4897 posts — Last Post 04/20/14, 08:43AM

Business Basics

Goals, Business Plans & Entities

831 topics, 7562 posts — Last Post 04/18/14, 04:25PM

Real Estate Finance & Legal

Financial, Tax, and Legal

Tax, Legal Issues, Contracts, Self-Directed IRA

2789 topics, 20033 posts — Last Post 04/20/14, 03:21PM

Property Insurance

309 topics, 2045 posts — Last Post 04/17/14, 07:41PM

Personal Finance Discussion

328 topics, 2732 posts — Last Post 04/19/14, 06:57PM

Loans, Mortgages, Credit Lines

Private & Conventional Lending Discussion

2838 topics, 19719 posts — Last Post 04/20/14, 06:28PM

Creative Real Estate Financing

1210 topics, 8772 posts — Last Post 04/20/14, 06:59AM

Crowdfunding Real Estate

35 topics, 463 posts — Last Post 04/19/14, 06:24PM

Real Estate Professionals

Real Estate Professionals

Real Estate Agents

1211 topics, 7999 posts — Last Post 04/20/14, 03:12PM

Bankers, Lenders, and Mortgage Brokers

441 topics, 1922 posts — Last Post 04/20/14, 07:09AM

Contractors

270 topics, 1685 posts — Last Post 04/20/14, 02:48PM

Local Real Estate

Local Real Estate

Local Real Estate Networking & Recommendations

1994 topics, 11626 posts — Last Post 04/20/14, 05:25PM

Americans & International Real Estate

161 topics, 566 posts — Last Post 04/14/14, 11:19AM

Foreigners Buying in the USA

62 topics, 409 posts — Last Post 04/10/14, 06:27AM

Canadian Real Estate

65 topics, 430 posts — Last Post 04/20/14, 04:56PM

Marketplace

Real Estate Marketplace

Real Estate Marketplace

15025 topics, 53969 posts — Last Post 04/20/14, 05:40PM

Real Estate Events and Happenings

165 topics, 2528 posts — Last Post 04/20/14, 06:01PM

Off-Topic

Off Topic

Off-Topic

2905 topics, 32411 posts — Last Post 04/19/14, 08:03AM

Housing News & Real Estate Market

914 topics, 8351 posts — Last Post 04/17/14, 08:41AM

BiggerPockets Real Estate Investing Summit

97 topics, 1751 posts — Last Post 04/10/14, 02:27PM

BiggerPockets Resources

Forums » Real Estate Development & New Home Construction » Commerc/apts deal Strategy& finance ideas? Construction new mixed use

Commerc/apts deal Strategy& finance ideas? Construction new mixed use

4 posts by 3 users

Signup

Real Estate Investor · Cincinnati, Ohio


I am hoping to get some suggestions on lenders/financing styles I should seek out and also overall deal strategy with a potential mixed use commercial building. Also overall strategy on how would you go about financing one like this?

Deal specs - existing commercial building in great mixed use area, retail first floor, 2-3floors apts above. Potential to buy, tear down. This has been occuring with neighboring buildings since a zoning change a few years ago, all others are fully rented and successful, so demand is great. Purchase $1Mil, Construction estimate $1Mil - $1.5Mil, so total cost $2-2.5Mil. Excellent cash flow above expenses that would push me over my goal for annual income from "passive" investments so it is a big deal I want to do and willing to invest in heavily. but also want to have the best strategy and know who to go look for about financing it.

Assuming a std 25% down requirement, I can afford it, but would be maxing out our investment capital (thus no new projects for a while or not with cash anyway, I do an occasional rehab flip here and there). And we have excellent personal credit.

So what are my best options to finance this, and who should I seek out? Any difference in funding/who to talk to, in the fact that we would be doing construction initially? Should I asume a 25% down payment, or other options to not sink so much capital into this one asset (besides a partner)? Most of my financing experience has been traditional non-owner occupied 30yr fixed loans, so I haven't done a true commercial real estate loan before.

Overall deal strategy in relation to finance suggestions? I currently own 4, 1-2 family rentals and 1 small 2-unit office building; with the addition of this one large asset I could reach my annual cash flow goals as noted. That said I also would love to not sink so much cash into one asset where it will be tied up, both to allow for another investment down the line, and for general security of having more cash accessible. Thoughts on strategies?
Thank you, I always appreciate everyone's insight and help!



Commercial Real Estate Broker · Canton, Georgia


Hi Justin,

What kind of cash flow goal are you trying to achieve.

Depending on age of the building tear down can get expensive as you have to mitigate asbestos and other items from going airborne. That increases costs versus standard demolition. When you have issues you have to tear down in stages carefully which costs more time and money.

For lenders existing mixed use developments are more risky to finance and ground up construction is extremely risky.

With you not having a track record in commercial much less doing ground up developments I do not see anywhere close to you just putting down 25% unless you partner with a developer that has experience and can back up the loan in case of default with trophy assets. Doing that you will have to give up some of the deal.

Why don't you just go for an existing property with a value add component or something fully performing. If you can tell me the numbers you are trying to hit I can suggest different avenues of real estate where it might be possible to achieve it.


Small_allworldrealtyJoel Owens, All World Realty
E-Mail: [email protected]
Telephone: 678-779-2798
Website: http://www.AWcommercial.com
www.AWcommercial.com 678-779-2798 [email protected]


Landlord · San Diego, California


I'm with Joel. I don't think there's any way you'll get 75% LTV financing through a standard financing sources. If had to guess, I'd say you'd be lucky to get 50%. If you're looking for a $2,000,000 loan, you'll need a net worth to match. Having a high credit score, while necessary, isn't going to be enough on its own. To make a deal like this work, you're going to need a lot of cash - including cash reserves above and beyond the loan.

You're far more likely to get financing on a commercial loan if the rents will support the payments. Doing something more speculative like this much harder to pull off.



Real Estate Investor · Cincinnati, Ohio


Thank you both for the insight. I currently own one commercial property and several residential rentals with about a 6 year history. That said the tear down/build up of a mixed use would be new for me but it is in a market where I own 4 residentials now, a college town, and the small downtown area has had extremely good occupancy and high rent rates for many years, even during the market down swings. I think its a strong investment but will need to research what options are out there and think creatively.
Joel, I will definetly follow up with you via email to discuss our goals further, I greatly appreciate your offer to provide some advice!
Thank you





Sign up