LOOKING FOR COMMERCIAL LENDER

[Louisa Davis]

Hello, I'm looking for a commercial lender for a multifamily property in Pennsylvania. The property is half vacant currently, and will need renovation. Loan balance between $1M-$2M. Any recommendations? Thank you!

[Henry Clark]

Quote from @Louisa Davis:

Quote from Henry@Henry Clark:

Are you just starting out?  If so:

1.   Go with a local bank or credit union in the area that knows the market.

2.  $1m to $2mm with a retro component is a big number if this is your first time.   A loan officer is going to have a hard time signing off.  Do you have other assets they can put a lien on that do not already have a loan against?  If you have other cash equivalent investments such as cds etc that you could move to their bank they can control?

3.  Ask the bank what their Federal lending limit is.  Make sure it is big enough for them to cover you as you grow.  Others will talk about getting the lowest interest rate and going thru different lenders.  I like having my banker as part of my team.   They already know my story as we grew.   They know our financials.  Are other deals and loans are tied to them so they will cross collateralize.  It’s Saturday Easter weekend 4pm and I can call him and say I have a deal and need $xxxxxx.   He can tell me aim good for it and let’s sign the papers next week.

@Henry Clark Thank you - great insights! Together with my partners we have sufficient balance sheet. Just need to be pointed in the right direction for this market to get started, and to find a bank that will be willing to lend on an asset with high vacancy. The federal lending limit is interesting. I need to learn more about that!

 If you have enough Balance sheet, then recommend the following to get you through retrofit and rent up.  Move money as a CD or several into that bank.  Can still be in the name of the original investors, they earn the interest.  Allow the bank to control or place a lien on those assets as collateral while the retro and rent up phase is occurring.  Request a construction loan, Interest only for say xx months.  Which will be rolled into a permanent loan with that bank.  Request a lower interest rate, since you have more liquid security against it.  We get about 1% to 1.5% points less on our rate when we do this.

You need to get rid of the $1mm to $2mm comment and come with a hard budget both on the retrofit cost and the Rent up phase. 

Don't assume 100% occupancy, make sure you budget interest expense during this time, put in a contingency. Put together a Capex budget year by year going forward.

Then the bank will know your conservative in your numbers and trust you more.