Are these good commercial loan terms?

3 Replies

Hi all,

I am trying to buy my first property. It is an out of state investment property owned by a bank. It is a multifamily dwelling that had poor management and needs to be turned around.

Here are the terms being offered to me. Do these look acceptable?

Option 1: 20% down

1) The land would be a 15 year repayment on a 5/1 ARM product. The loan would be fixed for the first 5 years at 4.25% and then adjust annually after that. There would be an annual cap on the rate increase of 2% with a loan cap of 6%.

2) The multifamily dwelling loan would be a 7 year repayment with a fixed rate of 5.25% for the full life.

Option 2: 30% down

1) The land would be a 20 year repayment on a 5/1 ARM product. The loan would be fixed for the first 5 years at 4.25% and then adjust annually after that. There would be an annual cap on the rate increase of 2% with a loan cap of 6%.

2) The multifamily dwelling loan would be a 10 year repayment with a fixed rate of 5.75% for the full life.


Any loan approval would be subject to receiving a management contract on the property. This requirement would stay in place until such time as the property would show a 1.35/1.00 DSCR as reported on a year- end federal tax return.

Our normal terms on prepayment are 3,2,1% for the first 3 years. If needed we will and can allow for additional principal reduction during that time. We just need to know the planned amount so our language can allow for it.

@John Jacobs Bigger Pockets has an entire forum section on Multi-Family.  Have you tried this post there?  You might get better responses.

My last conventional loan for a rental was 10 years at 6% fixed if that helps.

@John Jacobs
Why is the bank offering an ARM for the land and a fixed rate for the dwelling unit.
The length of the loan also is different. 

I also have gotten quote for ARM's and most have higher points paid at closing - so please factor that into your calculation.

rates seem a little higher than what I was thinking they would be.

Have you shopped around other lenders?
how is your credit score?

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