So I am considering a 5 unit, but the financing seems very risky. Spoke with a commercial lender and basically it seems as though it is amortized over 30 years, but I would have to either refinance or pay off the balance every 3 years. With an adjustable rate. Seems pretty risky. Anyone else have any other suggestions?
@Troy Forney can I ask how much is the property and which city. I’m sorry to sidetrack from your post but just wondering out of curiosity
$169,000. Valparaiso, IN
30 year amortization is actually good. I would have expected 25 or maybe even 20 years on a commercial property. 3 years is low. You should be able to find 5 and maybe 7 years. Let me know if you can't make it work. If the numbers make sense, I'd be happy to pay you a wholesale fee and do the deal.
@Troy Forney 3 years is way low. I work with lenders that will do 30 year amortization with a 30 year term, and a 30 year amortization with a rare adjustment at 3 years (based on prime).
@Troy Forney It sounds like you’ve found a lender that is offsetting a longer amortization period with a shorter fixed-rate term. Odds are you can find a 5-7 year fixed-rate with a 20-25 year amortization period. For what it’s worth, almost all commercial mortgages have the risk of the 5-7 year fixed-rate with a balloon term. Especially the tiny balance mortgage amount that you’re talking about. The net result is that (for the most part) these local/regional banks carry their own paper, have their own loan committees, and set their own parameters. It’s the nature of the beast.
Thank you all for the replies and good information. I may be getting ahead of myself. I am 3 rentals and 3 flips in. In about 3 years. Just tired of one at a time. Very slow with all SFR's.