Beginner Wants Advice On Commercial Property Financing
Hi,
I already have a few properties that I have obtained with standard residential financing (four units or less), 95% mortgages and I am thinking about getting into commercial real estate such as office buildings etc.
The difficulty seems to be in getting high % financing. A few commercial lenders seem willing to lend 75-80% of purchase price, but where do I find financing for the other amount? For e.g., if I only wanted to put 5% down, where would I look for financing the other 20%?
Obviously asking the seller if they will do any carryback financing is an option, but what are the others?
Glad to hear any advice. Thanks to you all.
There are numerous ways, here are a few off the top of my head.
Equipment and extra items can secure a higher interest loan and sometimes are enough to have the whole deal finance itself.
You could have the seller up the price with cash back at closing to secure the down payment, But your down payment will have to be non sourced and seasoned.
You could cross collateralize with your other properties to lower the down payment greatly.
If it is multiple parcels you could have the seller do two sales and allow you to get a loan one one of the parcels to secure a down payment on the other more expensive one. This works well with commercial properties with extra land (50% LTV on raw or unused land).
As always there are hard money lenders that will lend a higher percentage with lower down payment. Just be extremely leary of any lender that wants cash before closing. Some of them just collect deposits and never deliver, or make it so that you cannot close.
Partnering is always an option, with someone that has the down payment, or with a private lender you can offer a percentage of the deal to sweeten the pot.
There are a vast amount of ways to get it done, but at the moment I have run out of ideas.
Good Luck,
Kyle
Quote:
On 2004-11-08 07:23, KyleGatton wrote:
...You could have the seller up the price with cash back at closing to secure the down payment, But your down payment will have to be non sourced and seasoned.
Kyle, how do you do this? I assume you want to keep this off the closing statement, right? Do you just do a side agreement to get some money back from the seller? Or do you disclose this to the lender anyhow?
Not that I'm planning on doing this, just curious.
CT