All Forum Posts by: Darryl Dahlen

Not likely, but the good news is there are still lenders who will allow seller seconds. From what I've seen, lenders have definitely scaled back on the amount the seller can hold. More than anything, this is to ensure you are injecting capital into the deal. In general, you need to contribute at least 10% of the purchase price, and if the seller is willing, they could feasibly hold a seller second for 10%. If the lender offers an LTV lower then 80% you would almost certainly have to come up with the difference. Of course there are always exceptions in lending so take this advice based on my experience and not an actual deal.

Perhaps there is a trend where lenders are not allowing seller seconds anymore, but for now, I know there are still some out there.

If you are looking to structure the deal so you don't have to put any "skin" in the game, then you're wasting your time if you are seeking conventional financing. Some will claim 100% financing is possible, but not using conventional methods.

However, IF you can line up a JV or an equity partner then you could feasibly close a deal with no money of your own, but that too is unlikely. For that to happen you would have to either find an absolute killer deal or bring a wealth of operational experience and/or be the actual contractor. From what I've seen, in those situations it is likely the JV/Equity entity will either cut you out of the transaction or wait until you fail and take the deal for themselves. It simply becomes cheaper for them to do the deal themselves and hire the help.

I am only addressing your questions and not any of the other issues associated with commercial lending that could have an impact on whether the lender allows a seller second or not.

Hey, I was in Military Intelligence!!

My vote is to shut that forum down. As mentioned, I too believe its existence will only serve to drag down the overall quality of BP.

As this site expands it will likely attract an ever increasing amount of spammers who want to push their product and not contribute anything of value. By keeping the sandbox more controlled it will make it easier to make them feel unwelcome.

If BP finds itself in a position where there is an actual need for a bulk REO forum down the road, perhaps you can create a semi-private forum where the members are screened to keep out the spammers.

I agree and thank you for expressing it better than I did!

I have to use the word "most" here because there are always exceptions in lending.

"Most' banks do not consider your personal DTI when underwriting a commercial loan. This is because commercial loans use a different ratio called the Debt Service Coverage Ratio (DSCR) to determine the financial strength of the deal. They also do not discount the rent like they do in residential deals.

In most cases, the numbers that are looked to the most in a commercial loan are the NOI, DSCR, LTV, and to some extent, your credit score. These are of course backed up by tax returns, the appraisal, bank statements, etc. Since most commercial loans are full-recourse these days, your financial well-being is important, and this is where lenders can vary greatly as to what they'll want from you. Having a good credit score and a degree of liquidity (6 months reserves) are what I'd call a good start.

You'll have a hard time finding any long-term financing. The market is simply too volatile for lenders to get comfortable with putting their money out there for extended amounts of time at fixed rates. There is also the fact that office buildings aren't that desirable which gives lenders more reason to shy away from long-term loans.

If you occupied 51% of the space it would put you in contention for an SBA loan. Since you occupy less then the required space for the building to be owner-occupied you would have to make a case that you intend to expand your business by taking over a space one of your tenants currently has when their lease expires. Not exactly a sound strategy to go after SBA financing, but it has worked on one occasion for one of my clients.

Since you bought the property 3 years ago, the equity the property has will be considered yours. The property type isn't a favorite of most lenders given most places have plenty of inventory and lease rates are dirt cheap, but IF the property's financials are solid, and yours too for that matter, you should be able to get refinanced.

I'll say this though, I honestly don't know if you should refinance the property. Given the low loan amount, and the fact your terms aren't that bad, I don't know as you'll find a whole lot better.

Small balance commercial rates are currently in line with what you already have. I have one program that has rates in the 5s, but that's on a 5/30. You have a fixed for the next 7 years. It's kind of a trade off.

You also have to balance the monthly savings you'd get from a slightly lower rate versus the cost to obtain the new loan. So what if you save 100 bucks a month if the loan cost you 5g to get it?

Shaving off a point or two on a multi-million dollar loan makes a big difference, but on a 250K loan not so much.

Just giving you a couple things to consider.

Sorry for the late reply, but I signed off before you posted.

I haven't noticed any gremlins this morning so that is a good sign.

As for what happened last night, this is what I remember. I was on the main page of BP forums clicking on the pages at the bottom. I was progressively clicking on older pages to read some older threads. I went in order page by page back to page 6. When I moved forward to page 4, I think, I went to click on a specific post on page 4 and was taken to the login screen.

I signed in again and haven't had an issue since.

I was having issues staying logged in, but the problem corrected itself, until now.

I've been looking back through the pages to read older posts, and occasionally, the server logs me out when I change pages.

There doesn't appear to be any rhyme or reason to when it happens.

EDIT: Whatever was causing me to log has stopped. Weird.

Here's my two cents.

Before you get ahead of yourself, I would suggest you spend some time, and perhaps some money, and study the market.

You will not obtain any construction funds if there is already enough inventory in the immediate market. A lender will require, and most likely order their own market study to determine if more units are needed, ascertain the absorption rate, and see what sort of units (private pay, medicare, medicaid, VA, memory care, etc.) are needed.

I'm not saying you need to order a full blown market study, but you really should get a preliminary mini-study to get. It will cost you money, but it could save you a lot too by preventing you from going down the wrong path. After all, knowing what to do is just as important as knowing what NOT to do.

Of course you can also look to the town to talk ask about zoning/planning/permits to see if you can use the land for an ALF.

Is the land close to a hospital? That is usually very important. What about the location of other senior housing and nursing homes. Are there any around to "feed" the ALF?

Most likely, your construction options are going to be very limited. HUD is almost always the way to go for ALF construction, but since you appear to be new to this sort of endeavor, HUD isn't for the inexperienced. In addition, the financial burden for a HUD construction loan is immense and "most" lenders look for facilities that are 45+ beds or more with a minimum loan amount of 2MM. Not saying you can't look to HUD, but I would study up before thinking HUD is an easy lay up. It isn't.

PM me if you want some information on HUD's 232 program to get up to speed on the details.

As a side note, I wouldn't consider an ILF property as a possibility as they are almost impossible to finance. HUD won't touch them leaving you at the mercy of local banks.

The other basics certainly apply. You'll need to be well funded. It is good you own the land, but you'll also need significant capital. ALFs have long lease up times so you will need to carry the expenses during that time until the property can become self-sufficient. Figure on up to a year's worth of operational expenses.

You will also almost certainly need a competent management company to run the facility, but for now, you need see what the market can sustain.

Hmm, just think of the possibilities!!

I can only speak of what I would do from the opportunities I see. Being in the lending world, I see a LOT of good opportunities where there is equity needed to close the deal. This is often from the borrower lacking the capital to meet the reserve/operating capital requirement by the lender who will hold the senior debt.

If I had the money, I would provide funds to be an equity partner in multi-family/assisted living facility projects where there is government financing in play.

You wouldn't see a high turnover rate like you would with flipping homes, but you could definitely pick projects with a 10%+ IRR, be the preferred equity partner, and even dictate that you receive residual income after being bought out. Not to mention you would have a solid lender in 1st position providing long-term financing.

I see these scams being offered all the time. Unfortunately, there is a pool of borrowers who are so desperate for funds that enough of them bite on these scams to keep them alive. Almost always, they loose a large sum of money. Too bad, if they only did their DD they would most certainly be able to save themselves future grief.

However, some of these scams are based on a thread of truth. A person can certainly monetize a BG, SBLC, CD, etc. with little problem IF the transaction is real.

The problem lies in brokers/intermediaries who try to put these instruments into a borrower's hands often by leasing them. The fees to do so are often exorbitant, and from what I've seen, these transactions always fall apart.

Often times, the "provider" will provide a front copy of say an SBLC, but what really matters is the back copy. That is where a bank can verify who the actual owner of the instrument is. If the names on the front and back copy don't match, no bank is going to monetize the instrument. If the names match, it is a simple transaction, but if a person could obtain a 50MM SBLC from HSBC then they are in a different league then most and certainly don't need a broker to help them.

My personal favorite is the trading platform scams. Not only are the returns off the wall ridiculous, but it is impossible to verify references since they all hide behind privacy laws.

I look at it this way. If trading platforms could provide the returns they claim, wouldn't it be safe to assume that Warren Buffet wouldn't be investing in stocks??