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buying 8 unit building - loan questions - LoanUniverse Community

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buying 8 unit building - loan questions


2 replies to this topic

#1 cshelp

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Posted 04 October 2004 - 08:53 PM

I am buying a 8 unit building in los angeles - price 1,200,00

What options to I have for financing and where can I obtain some info on
prevaling rates at the moment and terms on loan length.

Also this building can be demolished and 6 condos/townhouses can be
built on the land.

Where could I get cost of construction info/estimates if I can get them at all
without going to the building contractor?


thank your for your help

#2 loanuniverse

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Posted 05 October 2004 - 10:08 AM

”What options to I have for financing and where can I obtain some info on prevaling rates at the moment and terms on loan length.”

Options for financing are varied, they can go from:

1- Seller financing {whole or partial}. Best way to get a high loan-to-value.

2- Bank financing {my area of expertise} Structure varies a little from bank to bank, but essentially you are looking at a maximum of 75% loan-to-value, Terms from 5-years to 15-years, and rates from 5% to 8%.

3- Non-bank financing {this is what some people that frequent the site offer}. They might be a bit lenient on the loan-to-value, but in my opinion they might charge you a higher rate in return.

The important thing to remember is that rates and structure are very flexible and have to be looked at very carefully when considering which lender to go with

Some examples:

- A lender might be offering a ten year loan with a twenty year amortization with a rate of prime plus 1% repriced every five-years. The other lender says “ I can give you prime plus half {50 basis points}, but he forgets to mention that it is repriced every year. Personally, I would much rather go with the five years peace of mind.

- Similarly everything else being equal, you want to go with the loan with the longest amortization as your principal repayment will be lower and this will put more money into your pocket every month.

”Where could I get cost of construction info/estimates if I can get them at all without going to the building contractor? ” Without going to a contractor, it will be difficult. My best idea would be to get a hold of appraisals for similar properties and look at the cost-approach breakdowns.

”Doing this will at best give you rough estimates as the costs change from one project to another, the appraisals will not be exactly for the type of project you want to build, and construction expenses have been on the rise lately making a two year old appraisal not very useful”

Good luck

#3 Commercial Lender

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Posted 09 October 2004 - 10:56 PM

Altough, we can finance upto 80% of the purchase, do you intend to demolish the property from the start or is that just an option you are considering? You may be seeking financing via a developer, since if you use a conventional commercial mortgage you will not be able to knock down the real estate and or sell portions of it off even if you renovate it. Any conventaional lender will be hesitant to lend on a project/property where major rehab is needed or intended for they may end up with liens on property that supercede their own.





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