Running into my first low appraisal and need a bridge loan until I can stabilize the property, bank knows that once its stabilized we will get the high appraisal we need. The appraiser went with sales data instead of potential income when comparing the properties. This is in a town of 5,000 where not many properties change hands of this size so the comps are not accurate. Long story short it's an 8 Unit + 1 Commercial that needs to be stabilized. All the unites are subsidized housing through the Maine Housing Authority and all rent is paid at HUD FMR rates by the state. Right now there are only 3 tenants, the management company is placing 2 and the commercial unit needs a build out to split into two units. Looking for a 1-2 Year interest only or interest plus principal loan. Purchase price is $200,000, we have $40,000 to put down on it. Where would you guys go?
@Cody DeLong I would use hard money if I had to, calling either Milk St. or Lincoln. A private investor would be ideal but that project may be a hard sell to that type of lender. If you have any capacity with a HELOC or can collateralize a personal LOC with other assets (investment accounts, etc.) those could be options, but ultimately hard money may be the best path to fill that gap and give you some time to stabilize.
One other thought, companies like New Egg and Discover offer personal loans that they sell as "debt consolidation loans." The terms are favorable to you and the cash can be used for anything, so those might be worth exploring. Sometimes you can get $30K - $50K at rates under 6%.
Best of luck putting the deal together!
@Harrison Smith Thank you for the advise. I hit up Lincoln, Milk Street wasn't really into the deal for what I could do for a down payment. I think too the rate was just too high. I'm looking at the seller financing option as well, this is the interesting deal with the guy in Jail so the rate at which we can come to terms may drag out. I'm going to see what Lincoln says and maybe go back to Milk St. Just found out the appraiser was missing some financial details so maybe we might get lucky but until then I'm acting like I need to find other financing.
The one thing i didnt see in your post is the ARV of the property
That will go a long way in determining the lending options on this one
Property is $200k, once stabilized the ARV is $300k if you go based on the income method. After all expenses on a full building it nets $2800 a month
We may be able to work with you on this. I'll PM you my email.
Hey Cody, May have an option for you. I would first try your local lenders which it looks like you have done. This group specializes in smaller balance commercial loans and will lend in Maine.
I would grab non agency debt for the underlying and then raise private for the build to stabalize, then refi once properly seasoned
@Justin Kane The problem is finding a private that would want a second... and my bank being dine with that. I was told they could lend me up to $94k so I'd need to find only $66k for the remainder under private
Thats not a lot of money, you could find HML or gap, but maybe first try asking fam and friends, or go to local networking events meetups go to nearest big town etc.
@cody if property is 200k. Small balance lender may go 70 to 75%. Based off discussion that would get you closer. Either a small private or maybe seller carry for the rest. Unfortunately can't connect outside of forum.
@Chad Davis problem is appraisal. I have the funding just not at the price it needs to be. I’m going to try to negotiate down and negotiate seller financing for sure.
Have you tried Connected Investors. They have ability to do pm and hm. They also have gap funding...
Hi Cody, this sounds like an interesting project. I'm looking for a similar property type (I have a few single/small multiple family properties) which are located ,as I am, in southern Maine. I'm looking for a hard money lender to purchase a single family. The broker I'm working just recommended Milk Street as well. Have you tried any of that are advertised through BP?
@Rob Milliken I'm going to try them! I have talked to a few Private Investors and should know interest this week from both of them.
The bank is still relooking at it all with the appraiser to see if we can get a higher price. I'm trying to set up a phone call with the owner who is incarcerated to negotiate owner financing. If I can even get him to finance 25-40% I'm positive I can get the remaining cash needed. In the mean time I may as well talk to some resources for cash.
Jeff, I have not gotten any funding from Connected Investors, but in Maine you may also want to try Lincoln Capital. Ryan is a great guy.
If anyone calls Milk St try asking for Jeffrey. Great Guy, great addition to the Milk St Private Money.
Cody Delong, keep in mind, either the numbers work or they don’t. If you reach beyond, sometimes you are creating value that isn’t truly there.
Never adjust numbers to fit a deal only take on a deal that the numbers truly work.
@Rob Milliken I agree. The numbers on this work really well, nothing is being stretched at all. It nets out $2k a month without the commercial space being rented and accounting for every expense and %. The issue is the area in which it sits has not many comps and the building isn't filled due to a few reasons to do with the current owner. The comps being used are not even the same size building or close to it.