I am interested in buying 4.79 acres with 100 storage units on it, house, office and shop. It is $900,000 dollars. I would trade my current commercial property- equity about $250,000 as a down payment. What would a bank need to fund the remaining amount owed or if they would. How long can a commercial loan amortize. The income from this business is about $10,000 a month with lots of potential with the property on a major hiway. Will a bank loan money if the property is over-priced? Thanks

Wendy:

One of the first things that experienced real estate underwriters tell you when they talk about how to do commercial real estate loans is that certain type of properties are not “desirable” credits. Unfortunately, one of those are “storage units” facilities. The reason is that while real estate is usually finite in supply, and you have some warning before more inventory is put in the market, storage units can be up in a matter of weeks. I just thought I mention that since a few banks do not like to lend on these properties.

The most likely way that this would be looked at would be as a straight income producing property loan. The problem that I see is that you mentioned ” The income from this business is about $10,000 a month” instead of saying the income from this property is $10,000 a month. When you throw in the word business, I immediately think of high levels of operating expenses. Loans are repaid with cash flow not with revenue. In the case of rental property, you need to have enough Net Operating Income.

This means that the bank will need to see the financial information on the business for three years so that they can determine if there is enough cash flow to cover the proposed debt service.

Commercial loans can be amortized up to twenty-five years, but twenty is more of the norm. {let me rephrase that, commercial loans can be amortized over a long time even more than 30 years, but the distribution is concentrated around twenty years }

The bank will lend money based in loan-to-value guidelines, but the value will be that shown in an independent appraisal. Let’s say that this bank has a maximum ltv for these type of properties of 80% and the appraisal comes in at $700,000. The bank will only lend up to $560,000 on the property. The bank will lend even if you are paying more than the property is worth, but its exposure will be limited by the appraised value. Also take into account that any other money that is borrowed to cover a shortfall {from a 2nd mortgage lender} will need to be repaid from the same cash flow.

Hope this helps

Wendy,

Loanuniverse is quite correct in his assessment.

What will help you is for the appraisal to be close to $900,000 or better. Particularly if that is the price you are going to pay for it. Also the NOI (Net Operating Income) needs to be $6000 or better in order to cover the debt service and have a monthly cash flow of $1203.6 or better. 6000 - 4796.4 = 1203.6 or better.

When I ran the numbers

Future Value: FV =0
Present Value: PV = 900000
Interest Rate: I percent (per year): = 6
Payments per year: 12
Payment per period: PMT=4796.4
Total # of payments N=360
(30 years =360, 15 years =180):

I am confident that I can get you the loan you need.


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Expedite your response by submitting your project here:

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I am sure this will shed light on your current situation!
Thank you

Chauncey White
Financial Expediter
"We Make Your Funding Happen"
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QUOTE:
"
LTV: up to 95% based on property cash flow and strength.
Properties are evaluated on a case by case basis.
Points: 2 - 5 including origination fees.
"

Although the high LTV lending may be intriguing, they are certainly getting paid with the fee revenue. No mention on whether the rate was fixed, floating, or balloon.

LU, any comments on the structure/pricing?

Why do they have to use all caps in their solicitations?

I am seriously considering making these salespeople register, and limit their advertising to their signatures. It is bad enough that they use all caps, they have a lot of spelling mistakes.

Going to go over my TOS "Terms Of Service" during the weekend.

Really, would you trust someone that writes in all caps and uses an apostrophe where it does not belong?


I just cleaned about a dozen posts, the Mylers were getting out of hand.

Amen!

I suppose they at least took the effort to find somewhat related posts, but that's still annoying.

QUOTE: The Fox Jun 9 2004, 10:35 AM
"
Although the high LTV lending may be intriguing, they are certainly getting paid with the fee revenue. No mention on whether the rate was fixed, floating, or balloon.

LU, any comments on the structure/pricing? he Fox
"

Rates are fixed.

Chauncey-
Your website states $5M loan minimum; post states $3M minimum; yet you state you can do the loan for $900k. I have an associate in a very similar predicament. Would love to talk. Seconds on a 36-unit multifamily in Michigan, anyone?