Commercial Loan

[James Syed]

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.

[Joel Owens]

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.