All Forum Posts by: Andrew Beauchemin

@Chris Branca Hi Chris, congrats on getting your first commercial property under contract!  There can be a ton of paperwork, and some banks can get caught up in bureaucracy, but environmental inspections, appraisals, any other "Phase 1's," etc. are all standard.

1 - I'd say 60-90 days is a generous closing period for a property & buyer both with good records and have their ducks in a row.

2 - Of course.  Their paycheck is on the line, and if your financing falls through, they just wasted 4 months of time not advertising to buyers that can potentially close.  This is why brokers love "cash offers."  Do your best to keep the broker updated.  BCC them on emails if you're comfortable doing so.

3 - This is something that should be outlined in your contract.  Sometimes they will charge a fee to extend the window, but the seller should be just as anxious as you are to get this deal done.  I don't see why they would cancel the deal if you're at the finish line and just need an extra week.

A good portion of a Mortgage Broker's job is expediting this process and keeping everyone in check.  I'm obviously bias here, but it may be something to consider for your next deal.

Good luck,

Andrew

@Leland S. What part of Philadelphia is the property in?  I would argue that there has been massive amounts of capital investment over the last few years.  There is a very attractive 10-year tax abatement that the government offers to qualifying buyers / developers.  Market cap rates continue to push into the low 5%'s, and I'm seeing new & renovated buildings sell for mid-high 300k's per unit in the right areas.

I'm happy to share some market data and offer opinions where I can.  Feel free to send a PM.

@Evan Pickvet-Hall I agree with the above comments.  You can get a commercial loan on any size property, if it is not owner occupied and considered an investment property. 

Residential loans generally offer more favorable terms than commercial, that's why don't usually hear about commercial loans on 1-4 units outside of special circumstances.

Consider looking into FHA 203k loans, or obtaining hard/private money for the construction then refinancing back into a traditional 30 year resi loan after stabilization.

@Jason Hill I would not trust any proforma numbers from the seller, and do your own due diligence for repairs, market rents, etc.  

Consult with your team (brokers, lawyers, GC, etc.) and make sure the numbers work for you before you sign into anything.  

Along with eviction, changing management etc. are there any ideas you can think of that would positively incentivize tenants to not smoke in the units??

i.e. provide an annual prize (New TV, VIP parking space, 1 month free rent, etc.) but you only qualify with 12 months of on-time rent payment and in good standing with management? 

@Matthew Dunn Yes, you have the right idea.  Bridge-to-perm.  

Get a 12 month interest-only bridge loan to cover acquisition and capex, then roll it into a long term loan after stabilization (90% occupied for 90 days is a good benchmark).

You can do this with two separate lenders, or find one that will take on both loans.

Agency SBL loans have $1M minimum, try and find a local/regional bank or a private money lender for the debt.

@David Dovidaitis A realistic LTV from a bank is going to be in the 65-75% range. There are other lenders that go up to 80%, but it is difficult to qualify for. 85% is just not realistic from a traditional debt source in today's market.

Is the seller offering you financing?  Why not have them finance the whole note?

It sounds like you have a good deal, but are just short on cash.  I would suggest finding a partner that can bring in the needed equity.

If this is a 1-4 unit multifamily, there are lots of low-down-payment residential loans available.

@Brad Willman You'll need to give some more details about your property in order to give you an accurate answer. What is the asset type? Location? ARV? etc.

Generally speaking, agency lenders (Fannie/Freddie) will give the best rates, but can have tough qualifications.  

@Travis Salley Don't over-leverage yourself.  I agree with David, shoot for 25-30% down.  Be ready for closing costs, legal fees, lender fees, liquidity requirements, reserve requirements, etc.

You can explore the idea of investing with partners and raising capital from family/friends.

Commercial Loans can get expensive.  Sometimes two 4-units under residential loans are better than one 8-unit with a commercial loan.

@Brian Garrett They're very similar.  I've seen more Freddie action than Fannie this year.  Slightly better rates, prepayment options,  & more willing to give 30am