I'm looking for buy a half-vacant 40+ unit apt building for $400k and approached a hard money lender to finance $160k. The remainder I will pay cash. This is what he came back with:
1. $3500 appraisal fee and $1000 screening fee paid after pre-approval letter but before closing
2. $2500 legal costs and $5750 in upfront points paid at closing
3. Interest rate of 11.99% on basically a 5-year note amortized over 30 years.
It's a reputable shop but I'd like to know if these terms are similar to what others are seeing or if I'm getting taken to the cleaners. Thanks.
That sounds pretty standard for the interest rate and terms, but the appraisal fee sounds high. The points seem high as well. The "standard" that I've been quoted have been 3 points. Yours is 3.5%.
The 5 year term is nice, since most that I know won't do more than 2 years, interest only, balloon.
I don't know what the Ohio lender market is like, but I'd say that it's within "normal range" but definitely not the best prices out there. The more corporate you go with the lenders, the higher the fees tend to be. The rates are usually similar at 12% and 3 pts.
Does the building happen to be in Cleveland on Buckeye Road?
Thanks Seung! I haven't been able to locate a single local HML in Ohio that will finance this type of purchase so I had to go outside the state. I'm sure they exist but I'm striking out.
Darren, no, this is in Cincinnati.
Seems a bit pricey to me but if that is standard for HML then I would steer clear unless u got a heck of a deal that you can make $$$ using your exit strategy. What area of Cincy?
this is well within the scope of a HML A and D loan.. and 5 years is great term.. although once you stabilize and get it up and running I would think you can refi out to much better rate.
I would think a lender in this situation would rely heavily on your expeirnce. that's a big project.. with the right experience and that amount of cash down... I would make the loan.
where are the rehab funds coming from
What is the current NOI of the property?
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