All Forum Posts by: Terri Wyzkoski

@Stephanie P.  I see what you're saying if she's financing on a conventional basis.  But if she's financing with a commercial loan, she can actually get a 5-year fixed rate right now in the mid-3% range with a 25-year amortization with appropriate income to service the debt, and if personal credit, liquidity, and net worth are strong.  Yes, I've seen lot of brokers.  I enjoy the collaboration.

I've done research on them as a way to vet the company to add them as a Funding Source to our nationwide Lender List.

Here's what we know:

They have 3 employees; the LLC was formed in March of 2017, although the website indicates they've been in business since 1972; listed on BBB since 2017 with no complaints.

You can certainly ask for professional references.  It's expected in this industry.

Marsha,

If your first investment property was under your name, did you get a conventional 30-year fixed rate mortgage? Or did you get a 5-year fixed rate with a 25-year amortization?  This will help me answer your question. 

Tatiana, are mortgage brokers worth it?  Some are.  Some are not.  Like any other expert -- a banker, an accountant, or banker -- invest time only with an authentic person that you respect and trust from moment one.  

That said, a commercial investor definitely needs two experts when seeking assets:  (1) a hard-working, experienced commercial real estate agent that will spend their time beating the path to find the projects you seek; and (2) a highly responsive, knowledgeable commercial mortgage broker, whose credibility with his/her lender network instantly gives your loan request/project credibility just by association.

@Allen Zhu  Let me ask a question to clarify.  Are you saying you have 10 loans with 30-year fixed mortgages on them at your bank?

Gabriel, I'm a little surprised that you're getting quoted 5.5% interest rates. What's the term on that? I've been a lender for 20+ years, and now I'm a broker. Before advising you on anything, I'd have to know your long-term strategy. If you're putting 50% down and the DSCR is going to be tight, you may want to look at a shorter term. For instance, 5-year fixed rate right now is about 3.25% to 3.5% fixed and you can get up to a 35 year amortization. That should definitely help cashflow. You do not need to pay down points, especially if you are strong financially (good credit, strong liquidity after the transaction, and reasonable net worth).

A commercial real estate broker is going to be your best asset, as long as it's someone deeply experienced and well-networked.  I'm happy to answer any questions you have

You lender is absolutely right.  If it were a single family home, you might be able to get away with a 30-yr conventional mortgage.  However, it's definitely considered an investment property with a stream of income, so you'll be required to put down 25% at a minimum and the term will be 5 years with a 25-year amortization.  So, you'll be refinancing every 5 years.

I've been a CRE lender for 20+ years. Now I manage my portfolio of clients at a mortgage advisory/broker company in Vienna, VA. Do all banks do this? The answer is that it's simply not a requirement to season a loan if there's been improvements to the asset. That said, however, there are some Loan Officers that are unaware, so they employ the "lower of cost or market" across the board without considering that the property's value has been increased significantly after improvements.

That's why it's so important that you have strong advocate negotiating for you, or mentoring you.

 If you're doing work to the property that will improve the value, then there is no seasoning period for which you need to have the loan. 

Purchase Price:    $100,000 +

Cost to Improve:     25,000

Total Project Cost $125,000 * .25 = $31,250 Down Payment

Then, once the project is done, you can simply refinance based on the new appraised value to pull out your equity, as long as you have income to cover the proposed debt service (i.e., a tenant paying rent).  The new appraised value may be $200,000 or higher.

Loan Amount:  $  93,750

Cash-Out:        $  50,250

Perm Loan       $144,000

Besides the improved cash flow from one asset, another of the benefits you'll find is that managing one property in one location is a lot easier than managing numerous SFH properties in various geographic locations. Finding a mentor is a great start to your cross-over journey. But I'd also advise identifying two other assets that are worth a lot more than you'll understand until after you close your first MF project: (i) a strong, well-networked real estate agent; and (ii) a high-responsive, extremely experienced commercial real estate broker.

First, the agent will do all the legwork to find you multiple opportunities simultaneously, and offer advice on specific geographic areas in terms of comps, employers who bring value to the area, and any upcoming development that could positively impact your prospective asset.

Second, the mortgage broker (especially if they have a lending background) will be able to underwrite the deal the way a lender will look at it, will have specific relationships with lenders with whom they already have relationships and credibility, they'll know the specific structure, rate, terms, programs/products that you will not know on your own.  Even a Loan Officer at a bank you visit may not know all their own products, so don't expect the Loan Officer to advocate for you.  The savings in negotiations for the bank fee, the rate, the down payment, amortization and selling the loan to the bank's credit committee pays for itself numerous times over the term of the loan.