Commercial Loan

46 Replies

Hello BP members,

I am currently offered a commercial loan with the following terms;

Interest Rate          5.25%

Down Payment      25%

Amortization          20 Year

Term                      5 Year Balloon

I'd prefer at least a 10 year balloon @ 4.5% with 25 year amortization. Is that possible? My credit score is above 800. I have 3 year experience in real estate investing.

Any suggestions would be appreciated.

Hi James,

Remember that any quote you get means nothing if the rate is re-traded before it closes. So track record of the lender is key.

Giving a quote over the phone before reviewing the borrower and the property is just a soft quote. Even if a rate is quoted then there might be things found in due diligence not known to the buyer or lender that changes rate, amount down, etc.

What you are quoted is typical from a local bank. You mention commercial loan but what are you buying?? Multifamily, retaiI, office, etc.

How big of a loan 500k,3 million etc.??

500k is mainly local banks and you will run into the rates quoted. Might can push 25 year amort. and 7 year term. If you do not hold deposits there and just looking at doing  a loan it will be harder to get more out of the bank. 

  

@Joel Owens

Thank you very much for responding. I know you are very good at commercial real estate investing especially financing. I have seen your posts on a regular basis. Again good to hear from a veteran.

I agree with you about initial quotes and how they change right before the closing. I am buying a multifamily family properties. Loan mount is $200,000. This portfolio lender is holding my accounts which is part of the quote.

Like I mentioned in my original post, I'd like better terms, but not sure if I could since the loan amount is under $500,000.

What are your thoughts?

James

200,000 loan in commercial is like a 10,000 house in residential.

To give you an idea we have a hard time these days getting commercial lenders to work on anything under 5 million.

I have some that will go down to 2 million and very rarely 1 million. Lenders usually make 1 point on the loans and just as much work or more work for a new buyer entering commercial than an experienced entity buying a 10,20,30 million property etc.

I am buying a small office condo to house one of my data workers. My local bank is doing 20% down and rate is 4.7 fixed. Loan is five years. They want 20 year amort. and I will see if I push them. It is a small loan for me and I could just pay cash but I like holding liquidity.

Some of my friends have gotten banks to go with better terms but have conditions where they must keep certain level of deposits in the account and if it ever goes below that the loan defaults to the higher rate and terms.

In the past banks gave sweeter deals and then the borrower would suck out all cash from accounts and then play the same game for another loan at another bank. Banks became wise to these tactics pretty quickly.

Even the small multifamily lenders I know the cut off for most is 1 million and very few 500k. So at your level I really see maybe other local banks competing for the business but nobody else.      

@Joel Owens

Thanks again. I agree 100%.

I will accept the these terms if I don't get better terms by the next week. Thank you again for valuable information. It boots my confidence.

No where else, but at BP, you get this expert advice and that's FFFFFRRRREEEE.

Also, thanks to Josh and Brandon for working so hard to provide us such a great platform.

This post has been removed.

James- I can refer you to a good bank who has a small balance commercial program that has a 10 year option and a 25 year amortization. I cannot tell you what the rate would be as you would have to price your loan out, but I do know that if you qualify you can obtain two of the three items you want. 

I'm very busy right now so I'm happy to simply refer the bank you. Send me an email and I'll give you my bankers contact info.

@Account Closed

Thank you for responding to my post. I agree quote do get changed before you make it to closing.

Sure, I will PM you soon.

@Account Closed

I forgot to answer your question.

Actually loan amount is $200,000 and down payment is 25%. So purchase price is about $265,000.

Thank you.

@Darryl Dahlen

Thank you for responding to my posts.

In addition, you amazed me with your speed of response as I got your email right away with initial contact information.

I will keep you posted to my commercial loan inquiry.

Originally posted by @James Syed:

@Darryl Dahlen

Thank you for responding to my posts.

In addition, you amazed me with your speed of response as I got your email right away with initial contact information.

I will keep you posted to my commercial loan inquiry.

 Glad I could help, James.

@Account Closed

Thank you for updating me. Loan amount would be less than $500,000.

Thank you @Darryl for sending me the quotes.

we recently did a commercial loan on a 6 unit that had 25yr amort, 10yr balloon with a rate of 5.125.  the lender was "local" but worked for a well known/national bank and the deal details remained fairly consistent from soft quote to actual close.  the loan amount wasn't large (about $400K) but i think the biggest driver of differences between the soft quote and final details is the appraisal, your credit rating and the ability of the building to support the monthly payment.   

i think what helped us get a reasonable deal and no games by the lender was that we were very open with our plans.  we discussed our short term and long term goals with the property and our RE investing.  I also shared the detailed numbers that i worked up on the property so she knew we knew what we were doing.  in fact, they said they wished all their clients did that level of detail.  i think that last point went a long way into providing the lender with comfort that we were a low risk borrower.    Prove to the lender that you know your stuff and you can get the loan specifics you want.....

@Mike R

Excellent advice. I have heard this before that lending is all about risk just like a lot of other things including real estate investing.

I will make sure that I have all my spread sheets along with other docs are presented before lender comes back to me with their answer.

Thank you for responding.

I have been offered this just today verbally.

7 Year Balloon

25% down

20 Year Amortization

5% Interest Rate

Still waiting for "on paper".

Thank you for your advice @Ashley Pimsner

I have just emailed you a list of lenders that I have used.

Welcome to BP.

Update;

Found two lenders who said they would do 7 year balloon, however one backed out after I sent all the docs. Waiting on the second one now.

@Ronald Perich

What kind of terms did you get? So you end up buying in Alton?

Yes, I will be sending Scott my docs this week. He is in my list even though he is offering 5 year balloon only vs 7 year that I wanted. He was very responsive and took time to explain and I didn't feel rush.

Keep investing.

@James Syed, I should close on an 8-plex (with an attached studio) in the next couple of weeks. It's a B property in a B area with a mix a B-F tenants, but the area has a lot of recent growth. A major employer just finished a nine figure construction project about five miles away, a new Super Wal-Mart just went up about a mile away, and a Chevy dealer just built a new dealership in town. 

Scott was able to match the rates I received. I checked with First Clover Leaf, Bank of Edwardsville, and First Bank in addition to Carrollton Bank. Scott at Carrollton is the closest thing I could find to a portfolio lender and is a great guy to work with. But I cannot say enough good things about Bank of Edwardsville and First Bank. Very professional and friendly.

I plan on doing a series of Blog posts about how I acquired this property, how I am going through an improvement plan, and what the final outcome is.

A teaser for you: 

- Conversions of four units into 3/2 from their current 2/2 configuration

- Potentially adding solar panels.

- Improving the property management of the complex.

- Increasing income and decreasing expenses.

I figure this to be a two year turnaround project after which time I will refinance or use the equity to help purchase another turnaround project.

@Ronald Perich

My BP account was messed up for 2 days (something about email verification glitch), it's just starting working again. Thank you @Joshua Dorkin

Glad to hear about your 8 unit investment. Once closed, let me know what town as I am trying to see what towns are worth looking into.

This idea of changing from 2 beds to 3 beds is something that I have never performed before. I am really excited to see how it goes. Kindly keep me updated on that.

Scott Jones called me today. He offered me good terms. He's a very good loan officer / lender as he is quick and explains everything in detail and doesn't make me feel rush. I would recommend him strongly to anyone, in fact I have some clients that I am sending them to him for their borrowing needs.

I have 2 more lenders that I am waiting for than I will be to inform you and other who gave me best terms. So far, Scott offered me

Interest Rate ---------- 4.25% - 4.50%

Amortization ---------- 20 Years

LTV -------------------- 80%

Term ------------------- 5 Year Balloon

Just sold my flip on Friday and have about 5-6 properties under my radar. I might need your assistance in choosing / finding the property that I will go for.

Talk to you soon.

      

@Ronald Perich

My BP account was messed up for 2 days (something about email verification glitch), it's just starting working again. Thank you @Joshua Dorkin

Glad to hear about your 8 unit investment. Once closed, let me know what town as I am trying to see what towns are worth looking into.

This idea of changing from 2 beds to 3 beds is something that I have never performed before. I am really excited to see how it goes. Kindly keep me updated on that.

Scott Jones called me today. He offered me good terms. He's a very good loan officer / lender as he is quick and explains everything in detail and doesn't make me feel rush. I would recommend him strongly to anyone, in fact I have some clients that I am sending them to him for their borrowing needs.

I have 2 more lenders that I am waiting for than I will be to inform you and other who gave me best terms. So far, Scott offered me

Interest Rate ---------- 4.25% - 4.50%

Amortization ---------- 20 Years

LTV -------------------- 80%

Term ------------------- 5 Year Balloon

Just sold my flip on Friday and have about 5-6 properties under my radar. I might need your assistance in choosing / finding the property t      

Join the Largest Real Estate Investing Community

Basic membership is free, forever.