There is a commercial property for sale in my area that the owner stated he would be willing to do a second mortgage on. He is asking $255k. If he is willing to do the full 20% so I don’t have to put any money down will banks usually sign off on this? I can put money in the deal but I’d rather not if I have that option.
Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes
8y
My experience, from conventional lenders to hard money (commercial), is that finding a lender that will let you acquire with $0 or 0% of your own money is nearly impossible. I've had numerous deals where the seller is offering more than enough financing to cover the 20-30% needed as a "down payment" however lenders typically come back with at least a 10% requirement.
There is a commercial property for sale in my area that the owner stated he would be willing to do a second mortgage on. He is asking $255k. If he is willing to do the full 20% so I don’t have to put any money down will banks usually sign off on this? I can put money in the deal but I’d rather not if I have that option.
If the property is generating income, the bank will decide based on how much income and the value of the building. It is worth approaching a commercial lender to see if it meets their criteria.
Rental Property Investor · Miami Beach, FL · Member since 2015 · 227 posts · 106 votes
8y
My experience, from conventional lenders to hard money (commercial), is that finding a lender that will let you acquire with $0 or 0% of your own money is nearly impossible. I've had numerous deals where the seller is offering more than enough financing to cover the 20-30% needed as a "down payment" however lenders typically come back with at least a 10% requirement.
Investor · Houston, TX · Member since 2015 · 233 posts · 188 votes
8y
It is not likely commercial lenders will allow you to acquire a property with none of your own capital as they typically want you to have "skin in the game". Having said that, it might still be worth pursuing and contacting many banks if the owner is willing to be creative.
Another option you can explore is to bring in a partner that can provide some of that capital that banks may require.
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
8y
I think you will have about a 0% chance of that. Maybe a 10% seller carry back. Call around to enough banks, but unless you have a really close and successful track record with a bank the chances are slim to none that you can do 0%.
Lender · Nat'l Commercial Mtg Lender - Round Rock, TX · Member since 2014 · 916 posts · 235 votes
8y
@Juan Vargas is correct, whether you go with hard money or conventional money, lender's want to know you believe in the project by having "skin in the game". You and the project would have to be very strong for a lender to allow a high combined loan to value. @Todd Dexheimer is also correct, the chances are slim to none that a lender will allow you to put 0% down. The only way I know to put 0% down is to have the seller carry 100% of the note. Typically I have seen the 100% seller carry note be on properties where the property is over valued, so make sure you do your due diligence.
It depends on your business plan and your credibility as an operator. We we able to secure owner financing on an $11 million 281 unit property. The seller held the 20% down payment as a note, and the bank financed the remainder. No money out of pocket, we actually walked away with money at closing, and title agent was befuddled as to how we did that.
People will say it can't be done, it depends upon the seller's motivation. Our seller was motivated and not many buyers, plus the bank knew if we defaulted, the seller would take it back.
Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
8y
@Aaron Barrett As @Juan Vargas, @Todd Dexheimer and @Karen Schimpf have pointed out that lenders like to see "skin in the game". Think about it this way: Would you lend to someone who only participated in the upside and never in the downside?
Experienced, well-respected operators like @Gino Barbaro have been able to do it because they've developed a solid reputation over a number of years. Their contacts with local lenders/brokers are stellar and that allows them to get access to financing/deals that others can only dream of.
Is it possible? Yes. Is it probably? No. Should you grind your gears in trying to make it happen? Doubtful.
Full time investor · Cincinnati, OH · Member since 2013 · 405 posts · 312 votes
8y
I always preach relationships with local banks. Treat banks like partners instead of commodities. Local banks so you can get to know the entire staff up to the president. I have banked with the same local lender for 10 years and they absolutely bend over backwards for my crazy requests. Part of that is they have seen what I can do with vacant buildings/empty land so their confidence is justified. If you currently have a portfolio, offer to transfer it to a local bank if they will do you this one solid.
Real Estate Broker · Greer, SC · Member since 2013 · 548 posts · 271 votes
8y
We have had banks lend with a seller held note as long as the note is on a different property.
Ex: We had a 1031 disposition fall out, but already had a replacement property and loan lined up. The bank allowed the seller to carry on another property we already owned and we closed without the down in cash.
Investor · Oskaloosa, IA · Member since 2014 · 126 posts · 65 votes
8y
Ash Patel laid it out on the table.
Get to know your banker, sooooo they know you --- goes both ways.
Invite your banker for a tour of your properties, market yourselves!!!!
Don't chase rates, chase relationships!
Coral Gables, FL · Member since 2018 · 5 posts · 1 vote
8y
Typically speaking, if you get a deal at the right price, anything can be possible. Yes, it is very rare for any lender or even joint venture partner to involve themselves in a project to fund someone else's dream.
If you have a deal that you negotiated at such a steal, that can change. If you have an amazing resume and so does your team, that can also impact your chances