Loan for commercial real estate

[JLeezer]

I'm curious if anyone could provide me some insight into the process of acquiring commercial real estate. I own two duplexes right now, but I seem to think that transitioning to commercial might be a bit of a change, especially on the financing end.

I guess my biggest question is how much of a down payment can I expect a lender to want to see? The property in question is a multi-office building, with 85% of the 4000 sq ft already leased. The property is listed for $500,000, but is generating $5,000 per month with the existing tenants.

Any experienced advice would be great. I'm not yet at the point where I want to bring my mortgage broker into it yet.

Thanks in advance.

[Gaulkin]

I would re evaluate this venture because there is talk about a slowing in commercial real estate.

[APChasse]

Well, commercial realestate is going to be different. Right now, 80% is ideal, especially as an investment (non owner occupied) property. There are programs out there that will allow for less down, but as Im sure you know, the interest rate with be much higher.

See if you can get some people lined up to occupy the other 15% of the property, that will help you as well. Right now, credit scores are very important, and if you cant cash flow, it will add another problem into the mix. (1.25 should be the debt service coverage ratio)

Please reconsider using your traditional mortgage broker for a commercial deal. You may have a great relationship with them, and they may say that they could get them done, but as Ive seen many times, they can hurt the deal to a point where it cant be fixed. Sometimes residential mortgage brokers just dont understand that commercial should be treated differently, and end up killing the deal for you. Find yourself a commercial mortgage brokerage, or a local bank you can trust. (local is good too because they may make exceptions that others wouldnt because they know the area better)

Any questions feel free to email at: Aaron at Lendingsvs dot com

Hope this helps!

[CIsaac]

I would suggest you contact your small business banker, who might in return bring in a relationship banker/senior business banker to answer questions. Depending on their loan amount limits or the property size, that relationship banker might then have to work with their commercial or real estate lending department. However, I would first try to reach the small business banker first. If you don't have a relationship and you have to walk into a bank, I would ask for a banker who's also a banking specialist or branch manager (most times they are the ones dealing with business loans).

Your net worth, credit nd cash flow will definitely be strong points. Oh by the way, some of them might ask about contracts.

I wish you well!

-Cheryl Isaac-
IBS - Isaac Business Services

[rachael24]

Contacting a small business banker is def. the best option before doing anything. Let us know what happens after you contact them. Good luck sweetie!

[capforge]

Please reconsider using your traditional mortgage broker for a commercial deal.

I would second that. You need a commercial broker for commercial deals. They can fill you in how much down and the best financing options.

Also, the person above who said now isn't a good time for commercial real estate apparently doesn't understand that real estate is VERY local- and making a sweeping statement like that is meaningless.

[hugh009]

ACTUALLY NOW could be the BEST time as it was just reported this afternoon that occupancy at Silicon Valley is way off!

I would agree with what others have said about financing and using your hometown banker.

What if you could find a building that needed some renovation and you offered to become the "office manager" for the building. You could offer offices through barter for some of them that could help you like a maintenance company, contractor, etc.

This worked like a charm for a young man that wanted to get into commercial real estate. He benefited tremendously as I discuss in my barter e-book Barter Wealth when they decided to sell it!

Hugh

[fitchtank]

Hi Jon,

The financing portion of making the leap from your residential income properties to a commercial building is pretty cut-and-dry. You need to consider what your current properties value is versus the comparable sales prices of office buildings similar to the one you are considering. Also, look into the tax benefits. If you need some help just let me know.

Regards,

[fitchtank]

oops.... it didn't include my signature:

Colby Fitch
GoodLifeHomes.com

[Antliv1]

The main issue regarding the commercial real estate investment today is going to be the quality of the tenants. Banks are taking a hard look at creditworthyness of the firms you have leasing space. Consult a commercial real estate investment broker about buildings that are on the market as well as buildings that are quietly being sold. Lease terms, /sf prices, vacancy and credit tenants are all items that have to be closely looked at when considering an investment. My adivce, find a property that you can add something to by way of tenants or improving the building. Many tenants will even contribute a fair amount of the costs in their buildout that improves your building.

[jZORIG7]

I can provide you capital for commercial projects , but the limit is 1 million in the US. If you need help or want me to explain the process I would be more than happy to.

[jtirado]

might be a bit late but we specialize in commercial real state broking, the company is wellstar financial we've been in the business for about 4 years now. The website is currently down because we're thinking about switching hosts, but it's wellstarfinancial.com give me a call at 770 778 0104 if your interested.

[consumertreehouse]

I wouldn't buy any real estate with the economy how it is now. Chances are if you bought you today, the property would not be worth what you bought it for in two months, because real estate value keeps falling. I have liquidated all the properties that I have a mortgage on, because they are not valued at what I owe, so I sold them. I keep the properties that I are paid off. Times are tough right now and to carry a mortgage especially with real estate values declining on a monthly basis.