I am looking to secure a loan for a hotel but think I may have some problems getting financing. I know there is a way. Any suggestions?
Background- we are just about to finish our Brrr on our 3rd property of two doors on each property to total 6 doors. We are living in three now finishing up for a refi in feb when we are totally done and will then have all 6 doors rented. I can refi it for less now with just the upstairs finished but the basement finished will add a lot of value to pull out on the refi and almost double the rent. A Hotel deal just came up that would cost less than my primary house and I could move into the living quarters there and pay less than my actual house with out renting anything out at the hotel since it may not run well for a bit due to covid. In two months I will have 6 doors rented. Until this latest house brrrr is finished I only have three rented out of the six. I am living in three of them so it looks bad as income isn’t really negative since the three are covering the other three with rent. When I do rent the last three it will basically all be income. I also have my income as a nurse that is stable full time but my husband hasn’t been working much since he has been working on the brrr so he isn’t showing much income but would be really easy to do since he is also a nurse. We are probably the lowest risk for financing but right now it doesn’t look very good on paper. Any suggestions on how to make it work for creative financing if the bank won’t lend for it?
Local commercial lending, community bank or similar. @Stephanie P. , do you have any experience with this space? Can you point her in a direction?
Not speaking about "creative financing" but let me say this - bank financing IS possible! Even though *generally* speaking, with the COVID environment, banks are more conservative these days.
I recently completed a commercial transaction using bank financing and low down payment...
This is an awesome financial example using institutional funding, showing it can be done: In October I purchased a 5 unit in Columbia, SC with a 75% LTV loan. But the best part is this... for the 25% down I used a business line of credit from another source to fund the 25%!! So, ZERO out of pocket. On an institutional loan! The bank was fully aware of this and approved it. Mind you, it was a small regional bank, but since when do I care who the bank is?!
Best of luck!!
The problem is with my brrr refi right now. I won’t be ready for that for two or three months. I have great credit but not sure if I will be able to get the commercial loan. My bank said it would potentially disqualify me from getting the refi if I got the commercial loan or even applied for it so close to my refi. So now I am not sure what to do. If I wait the property will be gone by then and I will miss it. Not sure how to pull off both so close together and doing want to ruin one just to check if I can get the other.
@Tamara R. hmm.. typically, on the commercial side its more about the deal than about you. They usually care less about your personal credit. Are these properties in the name of a business, or your personal name?
My rentals are just in my name no LLC. What do mean they are about the deal? Do you mean that it would have to make good money before we bought it? Sorry this is my first time with any commercial real estate.
Tamara, hi. Hmm..I would suggest placing commercial RE (and all RE!) in a separate entity. But thats just me. I digress..
Since this one is in your personal name, yes, they will be more closely viewing your personal credit and financial situation solely. If you had a biz entity, they would view the business, but also your personal - as in about 95% of loans, the institution will require a personal guaranty (if biz entity doesn't repay, they can come after you personally). But in your case, they only have your personal to rely on here. Is there anyway you can get the asset into the name of a business entity?
What I mean by the bank "viewing the deal" not you, is they typically pay more attention to the financial mechanics of the deal, and less to your personal credit. They will want to know things like DSCR (to what degree the asset incomes covers the debt service) and the financial stability of the deal. They only graze lightly on your personal credit.