Hello! I am looking for a smaller bank in Houston, TX to refinance some of my rentals. Looking for a commercial loan (loan in company name, but I'm willing to personally guarantee it). The problem I've run into is that so many banks put too much emphasis on debt-to-income ratio, annual revenue, etc. I need a bank that will prioritize the property, and the cashflow generated from the property. Anyone have a bank that specialize in commercial loans secured by the property?
Are these single family rentals? How many do you have? What do you mean by annual revenue? (the net operating income of each property? ... or your business? ) I'll be interested what you hear.
I have 1 single family, and 1 triplex to refinance this year. Looking to build my rental portfolio of 3-5 per year. They will be a mix of single family and multi-family.
The banks that I have spoken to have put a lot of emphasis on the revenue from our rehab business. But I don't think that should be the case - the rentals properties should be able to stand up by themselves, financially. I am of the belief that they should be looking at the cashflow of the assets, since that's what they are lending on. Of course, backed by company strength, and personal guarantee, which I am OK with.
I would recommend a bank alternative perm lender that won't consider DTI but rather DSCR. Rates are higher than banks but much more flexibility in underwriting guidelines.
Lenders will generally do a global cash flow back to the individual sponsors. The reason is pretty straightforward. If a sponsor has significant other obligations that are a drag on the sponsor's global cash flow, then invariably the sponsor will pull cash from other sources to support the other struggling ventures.
Even on non-recourse deals that I have completed, the underwriters want to understand the sponsor's global financial strength. Otherwise underwriting a project to just the specific cash flow of the respective property results in unnecessary risk for the lender. Without understanding the sponsor's global cash flow is very similar to some of the lax underwriting standards seen prior to the economic crisis.
If I would have seen a financial institution not doing a global cash flow during my time as a financial regulator, I would have criticized the lender for unsafe lending practices. I helped clean up billions of dollars in failed bank assets and the large majority of bank failures were due to poor underwriting.
I agree with Ryan. Maybe find a 3/1 or 5/1 arm with 30 yr term with no ballon and then refi with a Bank in a few years if possible.