Industrial loft conversion funder meeting question

Buying & Selling Real Estate
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Industrial loft conversion funder meeting question

Jason L.
Member since 2024 · 7 posts · 7 votes

I’m currently putting together a deal to buy an old industrial building and convert it to four loft apartments. It’s going to require some capital to make it happen, and the architect I found for the project collaborated with me on a budget of 1.1 million dollars in cap ex. I’m planning to move into one of the units and rent the other three. The rent from the other three units should cover almost the entire mortgage. My payment will hopefully by my calculations be less than my current low mortgage on my duplex.

My first meeting with the local bank went well and they’re connecting me with their commercial lending dept. I had a five page write up on the project for the first meeting. What should I bring to the next meeting? I want to be prepared.

My brother who owns a realty company came along last time which helped and I think the architect’s bio helped as well.

https://www.kent.edu/caed/sung-ho-kim

Any thoughts on what I can expect and how to look prepared would be great!

Thanks

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  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    14h

    OP don’t know what was in your package.

    Bankers like to know risk impacts. Use your base deal analysis then do variations.

    1. $100,000 cost overrun.

    2. 1% point higher interest rate.

    3. Rent rate reduction

    4. Vacancy

    Show cash flow coverage of P/I and break even cashflow.

    What are your key issues still open?

    1. Zoning

    2. GC

    3. Parking

    4. Fire sprinklers

    5. Foundation or structural

    6. EPA

    7. Etc. Address those.

    Tell him the bank term sheet you’re looking for. Construction loan interest only. 18 month rent up interest only

    Insurance-

    Property tax-

    Cost segregation? Only if your REP. Have invoice line items segregated by asset type to do early writeoff.

    Basically show the banker your looking at Risk management.

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    10h

    Jason, for the next meeting I’d go in prepared to show the bank not only why the finished project works, but how you get safely from the industrial building you’re buying today to four completed, rentable units.

    With a $1.1M renovation budget, I’d expect the commercial lender to spend a lot of time on the construction side. I’d bring the architect’s plans, detailed project budget, contractor estimates if you have them, expected timeline, zoning/use confirmation, permit status, and a meaningful contingency for overruns.

    I'd also have the stabilized numbers ready. Show what you realistically expect the three rental units to produce, supporting rent comps, operating expenses, projected NOI, and how comfortably that income supports the proposed debt. Since you're planning to occupy one unit yourself, I'd keep that clearly separated from the rental-income assumptions.

    The bank will probably care a lot about your own liquidity too. Even if the completed project looks excellent, they’ll want to know what happens if construction takes six months longer or costs 10–15% more than expected.

    I’d also be ready to explain the exit. Are you planning to keep the original construction loan, refinance once the property is stabilized, or move into permanent financing after completion? Showing that path makes the project much easier to understand from the lender’s perspective.

    From the tax side, I’d start planning the cost tracking now. With a conversion this large, separating building acquisition cost, renovation categories, personal-use versus rental-use portions, and depreciation basis from the beginning can save a lot of cleanup later.

    Feel free to DM me, I’d be happy to send over our Commercial Property Analyzer and a few tax-planning resources that may help you prepare the financial side before the next lender meeting.

    [email protected]941-914-7779
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  • Jason L.
    OP
    Member since 2024 · 7 posts · 7 votes
    7h

    Those are all great ideas. Thank you. I’ve got some homework.

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