50% down for commercial multi family property Bay Area

Commercial Real Estate Investing
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50% down for commercial multi family property Bay Area

Jill Rio
Bay Area, CA · Member since 2016 · 11 posts · 4 votes
We are considering a property with two commercial spaces and two 1/1 apartments. The realtor just told me we need 50% down. Has anyone experienced this and are there any other options? Also related to this property - what are some of the businesses you would market to for higher rents? Right now these are both showrooms and the rent is low. We own one dentists office and get really good rent on that but the space does not lend itself to medical offices. Thank you!
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  • Steve Hardaker
    Lynnwood, WA · Member since 2016 · 4 posts · 0 votes
    10y

    Hi Jill,

    What is the asking price?

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  • Chet Mazur
    Flipper · Cupertino, CA · Member since 2015 · 265 posts · 27 votes
    10y

    a 1/1 being call an apartment seems odd, but it might be part of a mixed use building. All depends on the zoning and land use. In general you should be able to get > 50% ltv.

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  • Kathy Henley
    Rental Property Investor · St. Louis, MO · Member since 2014 · 741 posts · 424 votes
    10y

    @Jill Rio Why would the listing agent have an opinion on the financing of the building? First one must know the value. The value of the building is linked to the income it can produce. Find an agent who can help you. Commercial is all about people. Look around the neighborhood and see what would be desirable to serve those nearby. This will give the best chance of success to the new lessees. Reach out to a leasing agent and get suggestions.

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  • David Dye
    Real Estate Investor · Torrance, CA · Member since 2015 · 186 posts · 45 votes
    10y

    @Jill Rio

    For commercial loans, we use a DCR of 1.25. If the property is only generating enough income to qualify for a loan at 50% LTV, that could be true... But as far as the highest you can go, the generally accepted number is 75% LTV for a purchase.

    Hope this helps!

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    They might be asking a low cap rate where the debt numbers only work at a 50% ltv.

    An example might be a client of mine buys a retail Starbucks at a 5.5 cap rate for 2,500,000. To make the numbers work with finance 25% down isn't possible for a lenders requirement. Would need close to 50% down in that situation. 

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    I wanted to add that (financing kills deals) so as an investor you have to understand finance from a lenders perspective. I often find buyers having little to no insight into how lenders view a property and under what conditions they will fund a loan. So these investors tend to spin their wheels instead of closing more property trying to get lenders to do things that are not realistic. Lenders want to stay in a conservative underwriting box especially for low interest rates so they can stand up to an audit by the OCC as making sound loans on the market.   

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  • Jesse Moss
    Real Estate Broker · New York City, NY · Member since 2016 · 7 posts · 2 votes
    9y

    Joel, 

    I have buyers for Starbucks if you have any at a 5.5% Cap :)

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