How is seasoning seen with assembly, for commercial loan?

Question

Ok, so I own 4 properties, each holding 1 duplex. This is part of a 1-acre tract, that holds a total of 8 duplexes.

I now have a partner, that's been working on picking up the other 4 one at a time, so, that we control the whole block. It's fenced on 3 sides.

We're going to add a gate and make this a special community, separate from the rest of the neighborhood.

My question is: I bought with cash, my partner is buying with cash. We're hoping to renovate to a higher standard and then get a commercial loan, so, that both of us get our initial cash investments out.

How would a bank/mortgage company see the seasoning on this, when some of the properties were bought 5 years ago and some only now. If we combine these separate lots  back into one big property, is there a way to do it, so that it's seen as 5-year seasoning? Or will they look at it only as when the last piece is bought?

Nick L. · Answer

@Michaela G. Late response, you may have figured this out already.

You 100% need commercial financing. They will not have seasoning requirements and will be fine with a blanket note. The downside is that you pay higher rates and the note will balloon every few years.

I have a similar situation where I was re-assembling condos from a failed condo development. I worked with a commercial bank to secure the first few and then piece the rest together. They were on board with my strategy.

You may have to call a few banks to find one that is in sync with what you are trying to do. Commercial lending is much more flexible than residential so there is a lot of variability.

Mark Creason · Answer

Would need additional info to help you.  What are your occupancy rates at?  What was the property purchased for?  Do you have a track record with like kind property? Etc?

Mark

Michaela G. · Answer

Thanks, Norm,

have never had anything to do with commercial loans, so, I simply don't know. Thank you for your response. It might help if seasoning is not an issue, but just the income.

Norm Bessette · Answer

Can't speak for everywhere but at least in Mass with the couple of banks I use on commercial loans they are solely looking at the balance sheet of the property.  I have only seen issues on seasoning when I have used residential/conventional loans, which is why I avoid them like the plague if at all possible.

I would just suggest discussing with 2-3 commercial lenders and see if you get a consistent answer.

Michaela G. · Answer

I'm thinking that once we have all parcels, we could combine them under the address of the parcel that I've owned 5 years and then all other parcels would be seen as improvements and we'd have 5 year seasoning. Would it work that way?