New to Real Estate · Los Angeles, CA · Member since 2020 · 19 posts · 2 votes
I am doing my homework and seeking advice/feasible loan options to pursue when partnering with someone to acquire a commercial warehouse type property. The property needs to be in Los Angeles, estimating $1.2-$1.5mil at least 10,000sqft. The intent of the property is to secure a larger space for the expanding business and then rent out the remaining space to other businesses.
Partner A: Owns and runs a business, has comfortable consistent cash flow to sustain estimated payments for such a property but minimal credit history.
Partner B: No purchase history of any property, w-2 income, excellent credit score with long history, zero debt.
Bringing high cash flow and excellent credit together between two individuals, what are some strategies and loan options you would suggest to acquire such a property?
As a private/hard money lender, would this scenario interest you, why or why not? What details influence you in pursuing a deal and what makes you look away?
That sounds like it would just be a standard bank loan with a co-signer or guarantor. Or maybe an owner occupied SBA loan. Not sure what the benefit of using a hard money (expensive) lender would be for you. Unless you’re ultra high risk or in the marijuana business or some other reason that would cause you to be un-bankable...
@Steven Ortiz A few topics to hit here. The price per square foot in LA is about 275-300 sqft so 1.5 mil would get your closer to a 5,000 sq ft warehouse. As far as who to partner with for the purchase, unfortunately a lender would want BOTH experience and credit history, It'll be a hard sell for one or the other. HML rates would be 9-13% and the higher LTV required would be a higher rate. Its a tough time to buy warehouses as traditional lenders are steering away from commercial/Industrial properties. Not to deter you but its an uphill battle in this Covid market.
That sounds like it would just be a standard bank loan with a co-signer or guarantor. Or maybe an owner occupied SBA loan. Not sure what the benefit of using a hard money (expensive) lender would be for you. Unless you’re ultra high risk or in the marijuana business or some other reason that would cause you to be un-bankable...
Gotcha, the SBA loans have been great and there are relationships there so this is certainly a feasible option. I mentioned the hard money in my post to get input as it was a suggestion from another member, wanted to be transparent with all options as whether to pursue them or wipe them off the table. Thanks for chiming in, Allen!
@Ronald Rohde I whole heartedly agree on the partnership agreement, I've been drafting that in the meantime to have ready. Thanks!
@Jonathan Taylor I've been seeing your name over a few posts the past few days, I certainly appreciate your knowledgeable input on various topics.Hmm Thanks for those numbers on sqft, I'll keep those in my back pocket when shopping around to compare. Would a lender be opposed to 2 individuals coming together who are strong in a single piece of that puzzle? I'm gathering that it is generally speaking, a standard co-sign scenario. Of course, with many more details involved. So it seems that hard/private may not be beneficial in this case, hmm ok good to know. Just navigating covid times as creatively as possible. Thanks!
@Steven Ortiz Anytime. Typically when going into a loan, you'd want to have your strongest foot forward. Most loans (not all), either commercial or resi, needs a warm bodied guarantor ie a physical person to say they will be responsible for the repayment of said loan. So if you have a partner(s) who have strong credit and/or RE experience, ideally both, it makes your loan stronger to underwrite. In this market, hairier deals are very difficult to close.