Is there a lender that anyone can recommend?

Question

There is a property I am interested in. It's a small piece of commercial property in my town. I REALLY like to deal with my local credit union for everything I can as their rates and customer service is fantastic. They are quite stringent with commercial and investment property loans.

If I can find a lender than will require less than 20% down I want to take this to the next step by getting a building inspection and making an offer if the inspection is good.

I can make the 20% down but don't want to tie up that much if I don't have to so I have some mad money for improvements/repairs.

Is there a lender that anyone can suggest? My credit is good so I don't think that will be an issue.

Thanks

Brian Essex · Answer

what state is the property located?

Darryl Dahlen · Answer

Retail property is a hard sell right now for most lenders since the economy is weak. With falling values, and a large amount of empty space in most markets, lenders are hesitant to take risks on retail property.

Lenders are already dealing with too much in the way properties that are underwater and/or are under performing.

That is why 80% is going to be a stretch. Not saying it's impossible, but the deal is going to have to fire on all cylinders for it to have a chance at that LTV.

If that is the benchmark you need in order to pursue then your local lenders are your best bet.

Problem is most banks/credit unions often won't tell you if the deal is too rich for their blood. They may very well come back with a lower LTV after you've spend weeks in underwriting and have spent money on a appraisal.

Bryan Snyder · Answer

The property is currently bank owned. I think that if I had to go more than 20% I would have to consider other options.

Darryl Dahlen · Answer

Without knowing who the tenant is or the terms of the lease, I can only speculate as to what is possible.

I think 80% financing is a little too aggressive. Would an offer in the 70-75% range be a deal killer?

Do you know if the seller would hold a second? Might be worth exploring.

Bryan Snyder · Answer

It is a retail location with an established long term tenant.

Looking to hold for the long term.

Darryl Dahlen · Answer

What sort of property is it and what is your intention with it? Lenders look at the use of the property along with the value.

For example, a gas station is hard to convert into anything else versus say a banquet facility that could be turned into office space, a restaurant, day care, etc. The later makes the property more marketable thus more appealing to the lender.

If the property is vacant your are in trouble if you need 80% financing. In that scenario, hard money is almost your only option, and for a vacant property you would be looking at an LTV of 50-60% if anything at all. Without LOIs from credible tenants, or you having an established business that can service the debt, most real lenders would pass on the deal.

Bryan Snyder · Answer

Thanks for the quick reply. I should have been more clear. I do not know for sure if repairs are needed, I just wanted to be able to keep a reserve for rainy days.

The property APPEARS to be in good shape but until I get a building inspection done I can't say. The current tenant reports no known problems.

Darryl Dahlen · Answer

I think I can safely say you won't find anything above 80%. There are a few programs where a higher LTV is possible, but they are government backed programs and it doesn't sound like the property you are looking at would fit any into any of them since you mention you need money for repairs.

SBA 7a loans do allow for TI upgrades, and the 504 allows for even more rehab work, but those loans are only for owner-occupied properties that can debt service at 1.2 or better. Even then, you would almost certainly be looking at a best case of 80%. More than likely, it would be in the 65-70% range. This of course is your experience, and the financials (yours and the business) qualify for an SBA loan.

As a general rule, most conventional lenders are comfortable with an LTV of 65-80%.