Commercial loan advise on timing for refi and cost for appraisal

Rental Property Investor · League City, TX · Member since 2017 · 40 posts · 10 votes

I have 6 houses in Fredericksburg, TX that we built from the ground up using a construction loan, that just recently rolled over into a 25 year at 4.5% principal and interest until the maturity date of April, 2027 where it will be a balloon payment.

Due to the rising interest rates, I wanted to see when is the soonest I could re-fi out of the current loan with a cash option to lock in a 25-30 year rate and pull out some cash that was used for the build. Also, wanted to know what an appraisal fee might be for a commercial loan that has 6 STR's on the propery.

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Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

@Mark Sheppard

Recommend you stop for a second and build a "Bridge" or "GAP analysis" to your goal of 100 doors in 10 years.

Right now, you're doing SFR, realize you could switch to MFH so change the following figures as needed.

100 doors at $200,000= $20,000,000 over the next 10 years. Again, switch to SFR, new construct SFR, MFH.

Each 1% point down payment or collateral = 1% x $20,000,000= $200,000.

Each 1% point rise in the interest rate is also roughly $200,000. Realize it will decrease over time.

I would use an average 7% interest rate over the next 10 years.

Discount programs that won't be available to you as you grow.

Start talking with your financing partners and see which ones are able to grow with you. Is their Federal Lending Cap rate above $18,000,000; assuming you have $2,000,000 in collateral on $20,000,000 base. Switch to that Finance partner versus approaching it, one house at a time.

Learn from the past. Most of Texas is an oil based economy, even if there is not a well within 100 miles of you.

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H. Jack Miller
Lender · Boca Raton, FL · Member since 2014 · 250 posts · 133 votes
4y
Appraisal fees in general have been going up and they have been taking longer to get done. if you want to get it done fast, you might offer the appraiser more to do it as a rush
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Mark SheppardPro Member
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Rental Property Investor · League City, TX · Member since 2017 · 40 posts · 10 votes
4y
@Jack Miller any idea on the average cost?
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H. Jack Miller
Lender · Boca Raton, FL · Member since 2014 · 250 posts · 133 votes
4y
Quote from @Mark Sheppard:

@Jack Miller any idea on the average cost?
I am not sure we are seeing prices around $500.00, but a lot of it is location specific.
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Mark SheppardPro Member
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Rental Property Investor · League City, TX · Member since 2017 · 40 posts · 10 votes
4y
@Jack Miller I was under the impression that commercial loan appraisals cost more than residential appraisals.
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Matthew CrivelliBusiness Member
Lender · MA · Member since 2021 · 1k+ posts · 1k+ votes
4y
Commercial appraisals will range from $600 - $1500. In this area of TX you will be 1k+ range per house. Many hard money or DSCR lenders offer products to cash-out rentals with little or no seasoning period if the properties are currently mortgaged and the projects are completed. (maybe 90 days) The catch is, the rates will start near 7% fixed for 30 years, this type of money has gotten much more expensive and I believe will continue to rise.

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Stephanie P.Pro Member
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
4y
Quote from @Mark Sheppard:

I have 6 houses in Fredericksburg, TX that we built from the ground up using a construction loan, that just recently rolled over into a 25 year at 4.5% principal and interest until the maturity date of April, 2027 where it will be a balloon payment.

Due to the rising interest rates, I wanted to see when is the soonest I could re-fi out of the current loan with a cash option to lock in a 25-30 year rate and pull out some cash that was used for the build. Also, wanted to know what an appraisal fee might be for a commercial loan that has 6 STR's on the property.

Your local bank should be able to help you on this. The appraisals for each property should cost between $450 and $650 depending on location. You may want to carry the loans at the 4.5% and then sell. We are at the height of the market and with rising interest rates, property values will taper off of decline (even with limited supply). You have time given the loans don't mature until 2027 and the interest rate is not close to what you'll be able to get if you refinanced on a 30 year blanket loan with a bank.

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Paul Camuto
Real Estate Coach · Robbinsville, NJ · Member since 2017 · 185 posts · 99 votes
4y
Quote from @Mark Sheppard:

I have 6 houses in Fredericksburg, TX that we built from the ground up using a construction loan, that just recently rolled over into a 25 year at 4.5% principal and interest until the maturity date of April, 2027 where it will be a balloon payment.

Due to the rising interest rates, I wanted to see when is the soonest I could re-fi out of the current loan with a cash option to lock in a 25-30 year rate and pull out some cash that was used for the build. Also, wanted to know what an appraisal fee might be for a commercial loan that has 6 STR's on the propery.

What does your commercial loan officer say?
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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
4y
@Mark Sheppard
Recommend you stop for a second and build a "Bridge" or "GAP analysis" to your goal of 100 doors in 10 years.
Right now, you're doing SFR, realize you could switch to MFH so change the following figures as needed.
100 doors at $200,000= $20,000,000 over the next 10 years. Again, switch to SFR, new construct SFR, MFH.
Each 1% point down payment or collateral = 1% x $20,000,000= $200,000.
Each 1% point rise in the interest rate is also roughly $200,000. Realize it will decrease over time.
I would use an average 7% interest rate over the next 10 years.
Discount programs that won't be available to you as you grow.
Start talking with your financing partners and see which ones are able to grow with you. Is their Federal Lending Cap rate above $18,000,000; assuming you have $2,000,000 in collateral on $20,000,000 base. Switch to that Finance partner versus approaching it, one house at a time.
Learn from the past. Most of Texas is an oil based economy, even if there is not a well within 100 miles of you.
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Nick BelskyBusiness Member
Lender · Orlando, FL · Member since 2021 · 1k+ posts · 704 votes
4y
@Mark Sheppard
If all 6 STRs are on one parcel, it will be viewed as a 6-Unit commercial property. If they are parceled out individually, you can have each appraised individually.  The sum of 6 is not usually more than the all as one... I just did a portfolio in Blue Ridge, TX similar to this earlier this year. You will get more total value as individuals but your property taxes will be higher. If you can't replat, then that doesn't really matter.
If you are parceled individually, then expect $550-700 for each property appraisal. You may also need to look into a blanket loan to wrap them all in to one loan or you can do individual residential loans.
If you are one big parcel, then expect between $2500-3500 for one big appraisal.  It all depends on demand in that area.
Not sure what others on this thread have been seeing, but the past 6 weeks, my appraisals have been getting ordered, scheduled, and reports in within 2 weeks with no rushes. I am seeing that all over the country.
In terms of seasoning to refi, if commercial (6-Unit) you will likely need 6 months from closing to get a loan based on the current appraised value. If you go residential (6 SFRs individually), some lenders will go from ZERO seasoning to 3-4 months to get a cash out based on the current appraised value.
Several different loan structures out there right now as well. Anything between 5-8%, depending on what parameters you are looking for... both short terms (1-10 years) and long terms (15 years +).
Cheers!
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Mark SheppardPro Member
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Rental Property Investor · League City, TX · Member since 2017 · 40 posts · 10 votes
4y
@Nick Belsky thanks for the great response.
Yes, it is 6 units on one parcel. I will wait for the 6 months seasonings period before pulling the trigger on a cash out refi or other option to grab some cash from the property and use it on my next project.
Which will definitely be something like this or bigger.
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