Questions on cash out refinance of warehouse property

[Jonathan Clark]

I recently rented my 15,000 sq ft warehouse to a multi-state, A credit tenant. It is only a 1 year lease with renewal options because the tenant does contract work for Duke Energy and does not want a long term lease in case their contracts don't get renewed. I have more than 50% equity in the building due to sweat equity and the fact that it is currently financed on a short term from the seller of the building. It cash flows decently even with an 8 year term but I'd like to get about $125k out (75% LTV) and go to a 15 year term. This would still provide a lower payment than I have currently. I have excellent credit and no debt except real estate. Current rent is $3,850, theoretical value is $370k and I owe $150k with 6.5 years left.

1. What type of prospectus or portfolio documentation should I prepare prior to contacting lenders?

2. Where can I find a lender willing to work with me even though the tenant has a "short" term lease?

3. Do I have to have another property / deal identified prior to cashing out and tell the lender where the money will be going? I have several opportunities and would like to just have the money available to move quickly.

Thanks in advance.

Jonathan

[Jeff Kehl]

@Jonathan Clark You're probably not going to like my answer but I think it's going to be pretty hard to find a lender for that, particularly if you don't already have an existing relationship with them. Why? For the reasons you list above, the tenant is not sure they will continue to need the property and would not sign a long-term lease makes it risky for everyone involved.

But it doesn't hurt to try. Larger Industrial property is a fairly hot area right now due to the e-commerce boom so you might find a bank that's interested. 

To prepare for it, just prepare a 1-pager summarizing the investment with what you laid out above plus some pictures an more background info on the tenant.

For you personally or the entity that would be borrowing you or your accountant should prepare a balance sheet and income statement. Include tax returns and statements for any accounts you list as assets.

If this is your only property then your basically showing your personal net worth and salary/income.

For the specific property prepare a pro-forma income statement showing proposed new debt service for the property.

Once you have the package ready just start calling small banks and credit unions in your local area and asking to speak to a commercial lender. Setup an appointment with them and walk them through the above.