Got Cash? - Posted by Danny Teodorescu

Posted by Del-Ohio on September 15, 2003 at 23:37:47:

When you come to that point you find a commercial lender. Banks will always loan money on good deals that are profitable, if the borrower has decent credit and a good track record.

Commercial loans are generally made at 80% of appraised value or purchase price, whichever is less. The down payment needs to come from somewhere else.

Ours comes from equity in other properties. If you play the game right and develop a lot of equity in properties you can get banks to use this for a down payment.

Other options that we have used and continue to do on occassion. Owner carries the down payment. Most banke want you to have at least 5-10% of the down.

The bigger you get the more banks want to loan you money if you are profitable and keep a good credit record. But you have to quit quit playing the games of trying to fit commercial ventures into programs designed to for residential lending. Its a bit like trying to fit a round peg into a square hole.

Once you get there ask the question again, there are a lot of people on this board that can help lead you throgh the maze.

If you want to start checking out the possibilities now, check with some local banks, talk to a commercial loan officer, ask them what their criteria are. Will they use equity as a down payment? Interview a couple bankers and get a feeling for the differences. Finding an agressive commercial lender will be your most valuable assett when you really want to push growth and expansion.

My Viewpoints


Got Cash? - Posted by Danny Teodorescu

Posted by Danny Teodorescu on September 15, 2003 at 22:56:19:

Ok, here is my question…let’s say I am an average person with average capital (cash) and an average credit score. Once I invest my cash and once I am fully leveredged how do I continue to invest…meaning let’s say based on my current circumstances I can buy 3 four unit buildings…but when I go to purchase the fourth banks start to say…"hey your personal income doesn’t justify your wanting to buy building #4…so sorry :frowning: " Now what do I do…how do people / investors get their hot lilttle hands on hundreds and thousands of units?? :-o Please help b/c I am genuinely concerned…I know that it must be possible, I just need to know how…thanks in advance for your help…

Re: Got Cash? - Posted by Frank Chin

Posted by Frank Chin on September 16, 2003 at 08:20:08:


I was where you were in the late 1980’s. I owned three multi-units where I had full doc loans, and the lender put me thru the grinder on the 3rd, and based on their DTI (Debt to Income), I was a borderline approval. My wife and I had combined low six figure income at the time.

I joked with the banker and asked if I had to be Donald Trump to get the fourth mortgage.

Then the RE market crashed around 1990. I was looking at foreclosures and REO’s, and finally concentrated on REO’s where the bank provided the financing. Finally, I purchased a REO at auction where the Bank provide 90% financing on the spot.

They asked bidders to bring their tax returns. After my successful bid, they pulled my credit report, and voila, gave my a 200K mortgage on the spot.

I was perplexed, and mentioned the problems I had with my last loan. He said “that must be a FULL DOC loan”. He added “We’re following NINA guidelines for this though we’ll also be keeping it in our portfolio since it doesn’t fully conform to FANIE MAE guidelines”. He explained that it’s because it’s sold “as is”, plus a few other details.

If it looks like you’re at the limit, and want to do residential RE:

  • Look for a small bank that can do “portfolio” loans, ie, loans that they don’t sell where they have to conform to FANIE MAE guidelines.

  • Do NO DOC or NINA loans where they do not apply the DTI. This is where you fail once you own several properties.

  • Or, as Dell mentioned, get commercial loans for a larger property. For these, the lender will be looking more at the cash flow of the properties.

I just refi’d a mortgage on a NO DOC bases, with the last one in June for 5.8%. This compares to the FULL DOC loan of 5.3% at the time. For NO DOC, all they need is pull my credit report and the appraisal.

I got this thru Greenpoint.

The Greenpoint banker explained that they package the “NO DOC” loans for themselves, plus other major players like Washington Mutual, and its sold to investors on Wall Street rather than FANIE MAE. So its not a portfolio loan.

Hope this helps.

Frank Chin