Quick question on commercial loan

6 Replies

Hello fellow Pocketiers, I have a quick question related to commercial loan.

Normally bank would ask 30% down-payment on loan. My question is if the seller willing to provide the financing on 40% of the selling price, and I only need to take the loan for 60% from the bank. Would bank still require me to provide the 25-30% on the transaction?

Just to plug in the numbers:

Let's say the property is $1M, and seller financing $400K. I would need the load from the bank for $600K. 

Will I need to put down $300K downpayment, or since LTV is .6, bank will not be asking for it?

Thanks!

Depends on the bank, but most, if not all will require you to have money in the deal. I have found banks that will allow me to put as little as 10% into a deal, but if they are leveraged at 55%, they may go with 5%. 

@Oleg Shalumov You'll have to ask a few banks. I haven't come across a bank which will let with zero skin in the game. But I do run into the occasional forum post where (if memory serves) someone says they did. Then again we (readers) don't know if they have $500K in deposits with the lending bank, if it's the 15th deal with that bank, etc. Local and regional banks all of their own loan committees to terms are different, history matters, relationships matter, so it's different than an originator that will turn around the sell the paper.

@Oleg Shalumov - You'll also need to see figure out if you'll be able to record a 2nd lien on the property.  A lot of commercial lenders won't allow a 2nd position on your property.