I got a building with ton of equity worth around 5million.

Michael B.

Member since 2021 · 26 posts · 2 votes

In this market i don't know what kind of loan or line of credit i should go with. Lenders are giving me 3 million LTV.

Should i do a line a credit buy a building cash and refi and repeat?

Should do 30 year Amortization and lock in the Rates?

I need some big investor help here.

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Scott E.

Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes

You say lenders are giving you 3 million LTV. That doesn't make sense. Sounds like lenders are offering you financing at 60% LTV if they are offering 3 million on a 5 million valuation.

The benefit of a line of credit is that you don't have a payment until you pull out the money. So you aren't burdened with a big payment until you find another deal.

It sounds like you own a commercial property based on the wording of your post. That means that you probably won't see a 30 year amortization, you'll be looking at a 25 year amortization. And a 25 year fixed is also unlikely. The lender will probably try to give you a 5 year fixed, in my experience.

All of that being said, I don't know how you've landed in this position of owning a 5 million dollar asset free & clear. But if you don't have experience investing in commercial real estate, you should really just sit tight, spend a year getting educated, and deploy these assets when you're more prepared.

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Jacopo Iasiello
Investor · Miami Beach, FL · Member since 2017 · 362 posts · 109 votes
4y
I understand you why this market does not give certainties The only one is that if the market goes down, which I think will happen, rents will remain stable or simply grow freezes at 30 years and remember to have positive cash flow the strategy is always the same good luck
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Kevin Woodard
Lender · Nationwide · Member since 2021 · 220 posts · 105 votes
4y
The options are many I would say. I would compare my options. Pulling out the equity to acquire more cash flowing properties is a very valid strategy.

Breaking it down, compared the terms of both a refinance and a line of credit. Ensure you can keep the line of credit during uncertain times.
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Scott E.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
4y
You say lenders are giving you 3 million LTV. That doesn't make sense. Sounds like lenders are offering you financing at 60% LTV if they are offering 3 million on a 5 million valuation.
The benefit of a line of credit is that you don't have a payment until you pull out the money. So you aren't burdened with a big payment until you find another deal.
It sounds like you own a commercial property based on the wording of your post. That means that you probably won't see a 30 year amortization, you'll be looking at a 25 year amortization. And a 25 year fixed is also unlikely. The lender will probably try to give you a 5 year fixed, in my experience.
All of that being said, I don't know how you've landed in this position of owning a 5 million dollar asset free & clear. But if you don't have experience investing in commercial real estate, you should really just sit tight, spend a year getting educated, and deploy these assets when you're more prepared.
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Peter Xiao
Member since 2022 · 8 posts · 3 votes
4y
One thing to consider the is speedy rise of interest rates. I am not sure what kind of loan you are getting but to other's point, you will not get 30 year but 25 amort and likely 10 year fixed. If you do have ton of equity you need to look at how hard that equity is working for you and what your current returns are at to make a sound decision. Also consider if the multifamily product type is what you want because those are always expensive to buy. There are many commercial options such as NNN retail that has zero management and you just get a check in the mail.
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Andrew HoganPro Member
Rental Property Investor · Indianapolis, IN · Member since 2016 · 560 posts · 463 votes
4y
CALLING ALL SHARKS COME TAKE MY MONEY.

Hope you're prepared for a plethora of DMs :)

I responded in another one of your many posts about this.

All the best @Michael B.
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Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
4y
You should make a decision sooner rather later. Interest rates are going up and you can lock in some fixed debt if you have a plan to deploy the capital. Holding the proceeds A) is tax free and B) is dry powder if you're looking for something opportunistic in the next 6 months.
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Tracy Tippett
Financial Advisor · Port St. Lucie · Member since 2020 · 44 posts · 15 votes
4y
Curious what is current dept and at what rate and term? If low rate and fixed then the CLOC is probably going to be best bet. If low rate ARM then refinance with cash out to a fixed rate product where you can attain both goals.
Tracy Tippett
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
4y
It always blows me away with posts like this.
You need to decide a plan of action. Research multiple avenues of investing and do something or possibly nothing at all. I have talked to thousands of investors over the phone over the decades and it all comes down to their personal situation and what their goals are. Sometimes they do not even know until they talk it out what makes sense for them.
So really until you get some clarity and direction doing nothing might be best.
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Nick BelskyBusiness Member
Lender · Orlando, FL · Member since 2021 · 1k+ posts · 704 votes
4y
@Michael B.
Depending on what type of Commercial property this is, you may be able to get a 30year fixed rate loan, if that is what you are looking for.
Many lenders are lowering their max LTVs due to the market, many are still at 70-75LTV on Cash Outs, provided you have enough cash flow to support it.
What you plan to do with the cash will determine if it makes sense to cash out or not to. If its going to sit in an account, then don't do it. If you are investing in other properties that will generate additional income, then you may have something. Interest rate is only relative to your goals and your metrics.
Cheers!
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Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
4y
Quote from @Nick Belsky:

@Michael B.
Depending on what type of Commercial property this is, you may be able to get a 30year fixed rate loan, if that is what you are looking for.
Many lenders are lowering their max LTVs due to the market, many are still at 70-75LTV on Cash Outs, provided you have enough cash flow to support it.
What you plan to do with the cash will determine if it makes sense to cash out or not to. If its going to sit in an account, then don't do it. If you are investing in other properties that will generate additional income, then you may have something. Interest rate is only relative to your goals and your metrics.
Cheers!

Show me anyone doing 30 year fixed, on commercial, right now in this environment? Maybe 7-10 fixed...
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Sam YinPro Member
Los Angeles, CA · Member since 2021 · 584 posts · 738 votes
4y
@Ronald Rohde there are a few out there that are still doing 30 fix commercial. Rates are on the higher side... 5.5% to 6.5%... but it's out there. I would rather do the traditional 5 to 7 yr term amortized for 30 yr at 4% so I can cash flow better. But the full 30 yr is still out there if you are looking for it.
This is as of June 24, 2022, when I last checked. I been pricing out proposals for my upleg and i have had these current terms and rates for a loan around 3M. I believe the rates would drop if you are looking for a larger loan, say over 20M, and could go under 3% if you are looking for a loan over 50M. This may change weeks, months, or years from now, as the Feds tighten up. You just have to keep shopping and build good relationships with lenders.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
4y
Interest rates change DAILY. Until a lender locks your rate and you can close in the time given you have NOTHING but dust in the wind.
Lenders love to suck in borrowers and blow sweet nothings in their ears, get them committed with tens of thousands in costs, and then re-trade them on terms and amount down. The name of the game is knowing which lenders are real and do not re-trade and have the current best loan terms which is a small amount of them.
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Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
4y
Quote from @Sam Yin:

@Ronald Rohde there are a few out there that are still doing 30 fix commercial. Rates are on the higher side... 5.5% to 6.5%... but it's out there. I would rather do the traditional 5 to 7 yr term amortized for 30 yr at 4% so I can cash flow better. But the full 30 yr is still out there if you are looking for it.
This is as of June 24, 2022, when I last checked. I been pricing out proposals for my upleg and i have had these current terms and rates for a loan around 3M. I believe the rates would drop if you are looking for a larger loan, say over 20M, and could go under 3% if you are looking for a loan over 50M. This may change weeks, months, or years from now, as the Feds tighten up. You just have to keep shopping and build good relationships with lenders.

Well, I believe you. I've just never seen it in my practice. Typically $5-25m PP.
I'm closing on a personal investment next month, 5.4% 20 year am, 5 year fixed. This is on an industrial property in DFW.
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Sam YinPro Member
Los Angeles, CA · Member since 2021 · 584 posts · 738 votes
4y
Quote from @Ronald Rohde:

Quote from @Sam Yin:

@Ronald Rohde there are a few out there that are still doing 30 fix commercial. Rates are on the higher side... 5.5% to 6.5%... but it's out there. I would rather do the traditional 5 to 7 yr term amortized for 30 yr at 4% so I can cash flow better. But the full 30 yr is still out there if you are looking for it.
This is as of June 24, 2022, when I last checked. I been pricing out proposals for my upleg and i have had these current terms and rates for a loan around 3M. I believe the rates would drop if you are looking for a larger loan, say over 20M, and could go under 3% if you are looking for a loan over 50M. This may change weeks, months, or years from now, as the Feds tighten up. You just have to keep shopping and build good relationships with lenders.

Well, I believe you. I've just never seen it in my practice. Typically $5-25m PP.
I'm closing on a personal investment next month, 5.4% 20 year am, 5 year fixed. This is on an industrial property in DFW.

I think it depends on the lender. The local bank I work with gives me a quick verbal quote initially with a few options, like 3, 5, 7, or 10 years. If I decide to take it, wether that day or a few weeks later, that's the rate. They dont do any locks later one like some institutions do. Out of the last 4 transactions I have done, all of them were LOIs sent weeks after the initial quote and conversations. One of them I was able to ask for it to be lowered because i heard rates drop that day.... 45 days into escrow already.
But in the end, it depends on the bank and the relationship you have with them.

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Tracy Tippett
Financial Advisor · Port St. Lucie · Member since 2020 · 44 posts · 15 votes
4y
Quote from @Ronald Rohde:

Quote from @Nick Belsky:

@Michael B.
Depending on what type of Commercial property this is, you may be able to get a 30year fixed rate loan, if that is what you are looking for.
Many lenders are lowering their max LTVs due to the market, many are still at 70-75LTV on Cash Outs, provided you have enough cash flow to support it.
What you plan to do with the cash will determine if it makes sense to cash out or not to. If its going to sit in an account, then don't do it. If you are investing in other properties that will generate additional income, then you may have something. Interest rate is only relative to your goals and your metrics.
Cheers!

Show me anyone doing 30 year fixed, on commercial, right now in this environment? Maybe 7-10 fixed...

Still have fixed rate long term money available for commercial, at least for now.
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Astrit Bauta
Member since 2019 · 10 posts · 3 votes
4y
Is the property cash flowing? There's plenty of options out there for long-term fixed rate AND non-recourse options. Happy to present you with a number of options if you'd like?
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