Commercial loan strategy. Assistance needed
New investor in Northern NY. I have an 8-unit residential pending contract submission for 120k.
ARV is 150k; which will likely be accepted in northern NY. If appraisal comes in the same or more I'll have at least 20% equity.
Financials on property are good according to commercial loan officer pre-contract conversation.
My Bank will lend up to 85% LTV on commercial.
Do I have to provide my RE contract to the bank as part of the commercial loan process? I'm trying to understand how to get this process accomplished without putting a 15% down. I have the cash but I'd rather keep it.
Any advice on if or how this works? I've heard that people establish their down payment by the seller holding a second mortgage. How does this get contracted and reported to bank. Or does it even have to be reported. The point in a down payment seems to be skin in the game concept BUT if I can negotiate a contract for instant equity didn't I put skin in the game?
Any advice on how to accomplish keeping my cash instead of using it for a down payment?
Thanks
Kim
Kimberly Harten
Hi Kim , is your lender basing the LTV on the appraised value of the property or the purchase price?
I would assume it's based on appraised value.
If so, I can't imagine that you would have to put 15% down because that equity is already there in the deal. If you were purchasing the property at the appraised value, then yes, you'd need to have a down payment to inject equity in order to meet the LTV requirement.
It depends on your lender's requirements I suppose.
Hope that helps a little bit!