Currently vetting 2 sites, and not happy about current lending options my client is being presented with.
Looking for a potential cash flow financing basis with 25% down on under-performing investment 40+ units in Florida.
Also interested in loan origination options that are available. I have seen some lenders offering up to 2 pts origination, but I imagine they are asking 4 to 7 puts up front from my client as well as a 9+% rate.
Where is the best place to look outside the box considering my buyer does not want to get into an investment group for a cash purchase.
It has been a couple of years since I have done a commercial lending deal, but I've got the buyer and feel he should have better options. Current lender is very conservative and is offering prime + 1.5 on real estate only, on the lower of existing value or replacement cost.
Am I wrong to assume, better financing exists? I know the current lender can perform quickly, but wouldn't any lender in that scenario? (75% LTV on the lesser value)
Any insight on current SOP is appreciated..
Are you saying your client is being offered financing at 9%+ with 4-7 pts up front? That's nuts.
I'm currently working on commercial financing for a smaller rehab deal in TX. Typical terms are a floating I/O note during rehab, converting to a miniperm at 5.5% fixed for 5 years with 1pt origination. Buyer puts 25%+ down and there may be a prepay penalty.
Your client will just have to dial for dollars. Call 5-10 local lenders of various sizes. For each one that declines, ask for a referral to another. By the time he gets through this list he will either have found the best terms available or figured out he is unfinanceable.
Nick L. the 9%+ with 4-7 points was in reference to me being able to paid up to 2 points as an originator. Those rates are not in my clients favor.... at first glance. (I am always willing to crunch the numbers)
But you are correct, quite likely it would be crazy to accept such terms.
He has been advised prime plus 1 - 1.5% as a rate, but that lender will do a 75% LTV on the lower of either the existing real estate value, or the replacement cost.
No consideration to the cash flow other than the asset requires a DSR of 1.25
So even if the asset had a 1.75 or 10 DSR, the max loan is based on the lowest value derived from the appraisal.
In one of my properties, this particular lender may be a player, simply because he can close in 7 days but my client likely loses to a qualified cash buyer, who is buying on cash flow all day long
Depending on the strength of the borrower and the experience you should be able to get better terms than that, especially if the property is close to fully leased. I have been giving anywhere from 4.5 - 5.5% fixed for 5 years/20 - 25yr amortization. Rates, more thank likely will be going up next week, so be careful on getting a floating rate. Shoot me an email if you have any more specific questions. I do know some commercial lenders in Florida that would look at this deal as well.
Take care and have a great weekend.
Network-network-network. Let everyone you know you are seeking private lending. Many investors with millions to invest are departing or out of the stock market, and your offer to pay 8%-10%, more secured by a property will be appealing.
Brady. PM if you are still looking for financing for this deal.