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Anthony Torri
  • Real Estate Agent
  • Fairfield County, CT
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Need some lender advice

Anthony Torri
  • Real Estate Agent
  • Fairfield County, CT
Posted Dec 7 2023, 16:58

What loan products are out there for a commercial mixed use 2-unit property where 1 unit is in need of a total rehab? One unit is an occupied apartment bringing in market rent and the other is an old bar that was closed many years ago due to water damage and was never restored.

It wouldn't be a primary residence, so I can't use a 203k. I would like to do a 20% down DSCR, which would work, but I don't know if that would be acceptable for a mixed use property and/or one that has a unit that needs a full rehab.


Does anyone have some ideas of what financing options I should be considering?

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Samuel Eddinger
  • Meriden, CT
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Samuel Eddinger
  • Meriden, CT
Replied Dec 8 2023, 05:48

In this cases I would say Hard Money.  After the seasoning period, do a cash out refinance to pay the hard money back.

Pinnacle is a hard money lender that many of my friends have used.

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Eliott Elias#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Investor
  • Austin, TX
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Eliott Elias#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Investor
  • Austin, TX
Replied Dec 8 2023, 06:43

If rehab funds are needed, I would steer towards private or hard money. 

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Robin Simon#1 Classifieds Contributor
  • Lender
  • Austin, TX
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Robin Simon#1 Classifieds Contributor
  • Lender
  • Austin, TX
Replied Dec 8 2023, 07:37
Quote from @Anthony Torri:

What loan products are out there for a commercial mixed use 2-unit property where 1 unit is in need of a total rehab? One unit is an occupied apartment bringing in market rent and the other is an old bar that was closed many years ago due to water damage and was never restored.

It wouldn't be a primary residence, so I can't use a 203k. I would like to do a 20% down DSCR, which would work, but I don't know if that would be acceptable for a mixed use property and/or one that has a unit that needs a full rehab.


Does anyone have some ideas of what financing options I should be considering?


DSCR Loans won't work both for the Rehab (no rehab allowed must be turnkey) and property type (Mixed Use is somewhat available, but would need more down payment). Should likely go with Hard Money or local bank/credit union

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Erik Estrada
Lender
#2 Private Lending & Conventional Mortgage Advice Contributor
  • Lender
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Erik Estrada
Lender
#2 Private Lending & Conventional Mortgage Advice Contributor
  • Lender
Replied Dec 8 2023, 09:17
Quote from @Anthony Torri:

What loan products are out there for a commercial mixed use 2-unit property where 1 unit is in need of a total rehab? One unit is an occupied apartment bringing in market rent and the other is an old bar that was closed many years ago due to water damage and was never restored.

It wouldn't be a primary residence, so I can't use a 203k. I would like to do a 20% down DSCR, which would work, but I don't know if that would be acceptable for a mixed use property and/or one that has a unit that needs a full rehab.


Does anyone have some ideas of what financing options I should be considering?


 Hard Money for sure. If the exit is a refi, you might want to get a longer term bridge loan to renovate and have tenants occupy the old bar. Commercial lenders generally don't lend on vacant property. And most require 12 months of rental history for a long term loan. 

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Derek Brickley
Pro Member
  • Lender
  • Ann Arbor, MI
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Derek Brickley
Pro Member
  • Lender
  • Ann Arbor, MI
Replied Dec 8 2023, 11:12

I haven't found an investment debt-service renovation program, so I would agree with other people that maybe hard money would be a good option.

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Devin Peterson
  • Lender
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Replied Dec 9 2023, 09:14
Quote from @Anthony Torri:

What loan products are out there for a commercial mixed use 2-unit property where 1 unit is in need of a total rehab? One unit is an occupied apartment bringing in market rent and the other is an old bar that was closed many years ago due to water damage and was never restored.

It wouldn't be a primary residence, so I can't use a 203k. I would like to do a 20% down DSCR, which would work, but I don't know if that would be acceptable for a mixed use property and/or one that has a unit that needs a full rehab.


Does anyone have some ideas of what financing options I should be considering?


 Hey Anthony, Hard money would be your best bet here. There are a few in the tri-state area that I would be happy to connect you with. I'm also located in Connecticut.

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Ryan Davies
Lender
  • Investor
  • Salt Lake City, UT
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Ryan Davies
Lender
  • Investor
  • Salt Lake City, UT
Replied Dec 11 2023, 07:37

Hard money could be good. Here is how most work:

  • Rates: 10% to 14% (Most Deals are 12%)
  • Terms: 1 Day - 24 Months (Most Deals are 6 months)
  • Fees: 2-5 points(%) of loan amount paid at closing (Most Deals are 3 points(%))
  • Minimum Loan Amount: $50,000 
  • Max Loan: 70% of After Repair Value(ARV)
  • 100% Rehab Financing Available (Require 20% of purchase price down payment or cross-collateral)
  • Closing Timeframe: 48 Hours - 3 Weeks (Most Deals are 10 business days)
  • NO PRIMARY RESIDENCES, NON-OWNER OCCUPIED ONLY, BUSINESS AND COMMERCIAL USE ONLY.