Board Topic: Commercial Loan
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Commercial Loan

Posted by: hende Nov 2 2004, 01:55 PM
Is there any way possible to get a commercial loan for a rental property with out a large down payment? I have heard 20% is the industry standard but I just dont have that. Is there help for me? Thanks everyone!

Posted by: loanuniverse Nov 2 2004, 02:19 PM
I think that the best way to do this would be to get the seller to finance a portion of the purchase with a second mortgage, as long as you get an agreeable lender, you should be fine.

For example:

The purchase price is $500,000

You only have 10% of the purchase price for down payment.

The lender will only finance 80% of the deal or $400,000

You secure an additional $50,000 in financing from the seller.

At closing, the seller gets $450,000 and a promissory note for the remaining $50,000

Please note:

-Net operating income should be sufficient to repay both loans.
-The offer on the property should be subject to this financing.
-The above percentages are just an indication, they can vary.
-Just like buying a car, the break that you get in financing can come back to haunt you in price so beware.

There are also other lenders {non-bank} that might be able to get you a higher loan-to-value.

Good luck.

Check out: commercial real estate sensitivity

Posted by: avatarfi Nov 2 2004, 06:33 PM
loanuniverse hit the nail on the head - When my firm does loans, we only fund 65% LTV, the remainder usually has some portion of the buyers own equity and the seller will "carry the balance", meaning they will take on a portion of the loan themselves.

Alternatately, you could find a second lender - we have done deals like this as well, although they are sometimes difficult unless the project is very large.

Best of luck!

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