Posted by tom on October 16, 2003 at 08:40:18:
Ray et al…
I am working on a deal right now, scheduled to close next week. it is a hard money (investment group) forclosure (i tried buying from bankruptcy court). the previous owner occupied many of the commercial spaces (22k sq ft multi tenant commercial with apartments), and is now out of the picture.
bank is lending 80% of purchase contract.
appraisal came in @835k, price 720k with 20k credit to buyer @close. bank does not want to hold this, tho i offered. loan product is based on FHLB advance. i chose a 3 yr reset product with call in 10. i think that is 5.75%, 25 yr am.
at close the bank will be in 69% LTV on appraisal price. debt coverage was figured with projected income on vacant spaces @1.9 by the bank. i figure it @1.35 on current income.
i guess because the deal is very good, and i asked, they are offering another 50k for some building improvements i wish to do in 6 months time (dry season, i want to repoint the brick). this would put me @90 loan to purchase price. they are not requiring any documentation on what i would do with the money. i am going to spend it on the building anyway, but…i could spend it on anything i wished. they wanted at first to do this up front @ close, but because this is my first commercial deal, they said they would do it after some rent up. this could conceivably done during escrow (as Dolf states), but i believe is unlikely, and impossible to get 100% financing this way.
But it seems it is possible to get 90% loan on price if LTV, debt coverage, and EXPERIENCE are all solid. however, i do not believe it is possible to get 90% LTV on a refinance as he states, nor 90% on purchase price, as he also states.
this by the way is my first commercial closing, tho i have 7 rental homes, two of which are free and clear (that is where my down is coming from).