Commercial Financing, repair funding vs down payment

2 Replies

Hey BP world!  This is my First post here!! I'm new to the community of investors, but not new to real estate.  

Current project I'm working on: purchase of a 4-unit, multi-building property.  Conventional won't touch it, but I already have contacts with some local and private banks that can fund it.  Open to new contacts if they have what I need, but that's not why I'm posting.

Specifically, I'd like to leave as little in this deal as possible (BRRRR), hopefully less than $50K. But it needs a larger down because of the commercial loan, and about 96K in repairs. None of this scares me, just trying to find some lending strategy:

Deal (simple math):

Purchase Price:              800,000

Lender financing: 600,000 (75% LTV)

Seller Note:                    120,000

Buyer Down:                    80,000

Buyer Repairs:                 96,000

ARV (5.5% cap): 1,100,000

Is there any way I can include the 96,000 as part of the loan balance or count it as the down payment, effectively financing 75% of the repair costs and increasing the loan amount.  I'll be correcting a few things on the property (septic/sewer, subdivision), so that I can refinance into conventional loans within a year or two.

Very familiar with overall loan qual etc., just not super fresh on the cash out/repair budget under a commercial loan.  Am I overthinking this?  Should I just swallow the repair budget until I can refinance?  I have a few other projects in the works that I want the funds for.


@Katie Criddle

Have you considered doing a hard money loan up front, then do all your fixing and stabilization, then refi to permanent financing after that? Then you'll be able to get all your cash back and lock in the best rates on your permanent financing.

I have two contacts around here that will do 10% down @ 10% interest. I think they will even finance your repairs. This way you get to keep more of your cash free for other projects.

We have looked at that.  A portion of the property is short-term rental, so we have to trickle in repairs over time or during winter.  

Also the corrections needed to get it back to conventional will take a few months of engineering, permitting and county paperwork.  So I'm looking more at the commercial, which are 5 or 7 year terms, and gives us the 12-18 mo. timeline we have in mind at 5 to 5.5%.

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