Loan for commercial property….

[Coronita]

Asking for a relative. Not directly me…

Does anyone have an experience with buying commercial property/land. If so, need information about loan on property.

Hypothetical situation. If said commercial property is $2million, what are we looking at in terms of financing rate and minimum down payment. I suppose this is a completely different game. We just need a ballpark figure….

[Coronita]

FWIW: this involves a partnership that went south. So what is being considered right now is kicking out one of the people by buying them out….

[SD Realtor]

For multi-family you cannot get longer then a 10 year term. You may be able to get the first 5 years fixed. The prepayment penalty is not trivial and the prepay is based on how many years left you have on the loan. Generally no less then 30% down. You may find some assumable paper out there.

[bobby]

when we purchased out building in 09, it was 15% down. We did this through SBA.

[Coronita]

Thanks for the feedback so far. The property in question is not a residential home/multi-home. It’s a commercial land with currently a fastfood restaurant on it. Lease is with fast food corporate company is renewed every 20 years.

…But anyway, wanted to figure out for a commercial loan what typically would be a downpayment amount (20% or more?) and what sort of interest rate would the loan be seeing if say said property was about $2million. Want to see if it’s feasible for said relatives and possibly myself to buyout said partner

(who is a fvcking scumbag BTW…I’m sometimes amazed how fvcking low someone can stoop when it comes to money, even it it means attempting to screw over really really close friends from 40+years…The dude is closer his EOL, and he’s still trying to rip people off..Amazing…Simply amazing…).

[EconProf]

Partnerships are a good way to end friendships. Partnerships seldom work out in the long run. Like lending to a relative, the nature of your relationship changes forever.

[livinincali]

Generally commercial loans are minimum of 30%, but you might be able to get a slightly lower down. They are almost always a variable rate based on something like LIBOR + some risk factor. Great credit and big down maybe 5% right now with a possible option to lock the first 3-10 years.

A lot of commercial loans will be based on a 30 year payment but a balloon payment at a 10 year term. They end up getting rolled a lot. So you pay a 30 year payment for 10 years and then have huge balloon 80-90% of the loan balance that you refinance. The pitfall is you still need a 30% LTV when you refinance so if the property goes down in value you might have to bring money to the table or let it go when the balloon comes due.

[evolusd]

flu – our commercial property loans are typically sized to the cash flow generated by the property, subject to a maximum 65/70% LTV. A good starting point would be a debt yield of 12%. My guess is your property is triple net, so take your NNN rent and divide it by .12. This should get you an approximate amount you could borrow (obviously depending on credit characteristics including who the corporate tenant is, when the lease expires, where the property is, etc).

We are almost always a recourse lender above 50% LTV, so you and/or your family would need to personally guaranty the loan.

Typically terms are up to ten years with a 25-year amortization. You can get variable or fixed rate financing, but the spread above the corresponding LIBOR/Swap rate will increase the longer fixed you go. Spreads above LIBOR/Swap will range from 3% to 4.5% depending on the deal.

Hope this helps. If you’d like me to take a closer look at the specifics, send me a PM.

[flyer]

Lots of great suggestions here. I’d like to add one other thought. I’ve been involved in several commercial properties over the years, and I’d make very sure that you, or your family members consult your attorneys–whatever you decide to do, and especially in a “buy-out” situation. Things can get very “sticky.”

[Coronita]

Thanks folks for the insight. evolsd, I’m sending you a PM just for curiousity sake. Tenant is a large fast food chain. The lease signed is every 20 years, it was just renewed recently.The lease stipulates rental rates, with step-up rates every 5 years…

Flyer, definitely….In fact, I think we’re getting out as soon as we can.. Things have gotten ugly very fast. And although we’re personally neutral in this matter. Eventually, if we stay in, we figure we can’t possibly beat the GM because he is an expert at ripping people off (legally, though with definite ethics issues)…If we stay in for the long haul, we’re gonna get screwed, just like he already tried to do with the other partners…And he is hell beat at eating everyone else in this arrangement.

It’s kinda too bad, because the return was really really really good, and the potential was there. I think that’s why the GM is so hell bent on screwing everyone else over it.

[Coronita]

Turns out we’ve decided to sell. Partner is too shady, and we can get peek pricing right now…And most partners are interested in getting the cap gains rate this year… Thanks all.

[Anonymous]

sales online
Congrats for making it possible for creating this blog. I may not always visit this blog to see more updates but i will consider every valuable information i read here. Please keep up the good work and good luck for the upcoming post.

[Author]

Posts