Commercial property needs repair- how to finance/ buy?

5 Replies

I’m new to commercial financing. I am interested in this commercial property that requires some repairs but the owner wants cash / hard/ private finance. I am assuming someone tried to purchase it but finance didn’t go through because of the repairs it needed. The property is $500k and probably needs about $50k of work. What option is there to finance this?

I'm assuming that the $50k of required work is deferred maintenance? Banks will finance properties like this. I do appraisals for banks where the borrower plans on doing some work right after purchase all the time. I think you should talk to a few banks and tell them what the situation is and see what they say. If you want to finance this property with a bank, the bank will require an actual contractor to come out and give you a real estimate for the repairs.  

Does the seller have the inspection report to share from the past buyer? Repairs might be way more than the 50k you are thinking. Might want to start there before spending all this money trying to make something work when the deal might not be workable to start.

@Gina s

there is hard money available for acquisition and renovation as well as the subsequent long term financing in the commercial world, but commercial renovations can be expensive. Find out what it needs before moving forward. 

stephanie

This is how you can do it. Offer him $450K. Put the property under contract, deposit $5K in an ESCROW. Do your Due Diligence. Start calling the big National tenants, Burberry, Hilfiger... 

Make sure you make a nice presentation of the building during those 45-60 days you have to look it over. When you get a hold of a good tenant, they will give you a LOI, they will sign a NNN lease with you and give you a corporate guarantee that they are going to pay you every month for the next 10, 15, 20 years.

Show the LOI to the bank and they will give you the loan just based on the corporate guarantee from a strong tenant

Let us say, they offer you $10K/month, the building jump in value. Then you can cash out and refinance or keep the equity in it

That is how you do it 

@Gina S. try local credit union and they would typically use the following equations

1) Buying price *80% = Loan amount 

2) Buying price *20% + Repair amount = Down Payment 

3) Down payment + Closing Cost = Total cash investment 

50K repair isnt bad at all for 500K purchase. If a bank said no then explore "why that was a no" .. May be purchase price was too high . Also if owner want cash/hard money then you need to offer low since hard money will cost you more. 

Wish you luck and keep us posted.