Commercial Loans for Residential Property

9 Replies

I realize I am new to the investing in real estate and all, but I just wanted to share this as it helped me purchase my first rental property. I recently acquired a 2/1 for 49.9k with 10k down plus 1200 or so in closing costs here in Wichita, KS. My issue with the purchase was getting the finance for fixing or updating the house once the 13 year tenant moved out. She was looking for a place long before I took over but I did work with her. Once she moves out in December I will be able to update the property through my commercial loan. Here is the exciting part. I knew nothing of commercial loans before all this. I found out by talking to a commercial loan officer at a bank that I can use commercial loans for residential property. Here is where it got good for me. I was able to get a 25 year loan with a 5 year fixed rate at 4.25% ANNNNNDDD I was able to roll all the costs of updating the property into the loan but has to be done within the first 6 months of the purchase. I got an appraisal done and found the property is appraised around 82k. They loan up to 80% of the value being a little over 65k. So NOW I have about 25k to use for updating the property. The only thing is that I would do it myself but circumstances make me need to use a contractor. Bummer. Nonetheless still exciting. There you have it. My learning about commercial loans for residential purposes in a nutshell. Hope someone finds this helpful.

@Eric Lee Nation wow that is awesome. thank you for share. I was having issues getting a loan as well for my property due to the amount and me buying while I was stationed in Japan. what lender did you do with? I might try some refinancing.

Jimmy Dang if you are trying to invest in Wichita, KS then I used Kansas StateBank. If not then i dont think they will be able to help. But i would just ask several banks if they offer commercial loans. If they do then figure out which one might be more investor friendly. I just happened to find the right bank with some great people.

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Originally posted by @Eric Lee Nation :

I realize I am new to the investing in real estate and all, but I just wanted to share this as it helped me purchase my first rental property. I recently acquired a 2/1 for 49.9k with 10k down plus 1200 or so in closing costs here in Wichita, KS. My issue with the purchase was getting the finance for fixing or updating the house once the 13 year tenant moved out. She was looking for a place long before I took over but I did work with her. Once she moves out in December I will be able to update the property through my commercial loan. Here is the exciting part. I knew nothing of commercial loans before all this. I found out by talking to a commercial loan officer at a bank that I can use commercial loans for residential property. Here is where it got good for me. I was able to get a 25 year loan with a 5 year fixed rate at 4.25% ANNNNNDDD I was able to roll all the costs of updating the property into the loan but has to be done within the first 6 months of the purchase. I got an appraisal done and found the property is appraised around 82k. They loan up to 80% of the value being a little over 65k. So NOW I have about 25k to use for updating the property. The only thing is that I would do it myself but circumstances make me need to use a contractor. Bummer. Nonetheless still exciting. There you have it. My learning about commercial loans for residential purposes in a nutshell. Hope someone finds this helpful.

The only issue is that in 5 years, the loan is due and mort. rates are going to be much higher.  Anyway you can lock in a 10 year balloon amortized over 25 years?  If this is a long term hold, it may be worth exploring.

Originally posted by @Eric Goldman :

@Mike Adams usually these are 5arm 25 year am and they reset every five years with the choice to refi. usually the reset is libor plus 1. Commercial loans are great way to buy real estate. if you are bankable you can form a great relationship until you hit the limit.

Locked in four com. loans this year.  All 10 year balloon with 25 year am @ 4%.  Anyone who's doing a buy and hold would be unwise to take on a 5 year note...  For a flip, no issues though.

Like I said I am new to the commercial loan. This just happened to work in my situation. I was planning on refinancing after a year or 2 anyways to convert to a residential loan. I just didn't want to spend more money out of my pocket for updating. But I am always glad to hear more info. Knowledge is power as long as you put it to use.