| Setting The Record Straight | | | | wisdom says that the borrower will shift his |
| There is a metaphorical place in any business when | | | | resources to protect his personal residence ahead of |
| the seeker of inside secrets reaches that signpost | | | | his commercial investments. This may not seem |
| that says something like: "Beewair … Theyre | | | | immediately apparent when you look at the spread |
| bee Dragyns ahed." Again, keep in mind I am being | | | | between home loan rates and Wall Street conduit |
| highly metaphorical, but I've been asked a number of | | | | rates (these commercial rates are actually lower than |
| times about a certain type of commercial real estate | | | | most residential ones). However, you need to check |
| financing that makes me begin to suspect that | | | | the terms to see the difference. |
| someone is out there selling investment property | | | | You can still by a primary residence with no money |
| "treasure maps" for $5.00 each! And you know just | | | | down and good credit. You can not purchase a |
| how much treasure you will find following such a map. | | | | commercial property without some form of equity |
| So as a professional commercial real estate loan | | | | investment. In most cases, the commercial lender |
| broker, I am here to set the record straight: | | | | wants to see a minimum of 15% equity in the deal, |
| NO LENDER offers a 100% Loan to Value commercial | | | | although you can find some that will allow 10% |
| real estate loan. | | | | provided the property meets minimum debt service |
| And I define "lender" to mean a source of capital | | | | requirements. But good luck finding that situation in |
| that provides debt financing, secured by real | | | | most good markets. Oh, and very few commercial |
| property. | | | | loans go full term like residential loans (yes, I know |
| So for all of you seeking that 20% Seller Carry and | | | | that there are exceptions). Most are balloons at 10 |
| the 80% purchase money loan on a property you | | | | years. |
| think is worth three times the purchase price | | | | Yes, you can engage a mezzanine lender to fund |
| … please, join us back here in reality. If pigs | | | | almost all of the equity difference, but you are really |
| had wings, they would fly. So, if a lender was willing | | | | going to pay for it either in points and rate or in |
| to allow you to purchase a property on those terms, | | | | some form of equity kicker … which takes us |
| why would they need you? They would make a | | | | away from my definition of lender. And mezzanine |
| whole lot more money doing the transaction | | | | lenders don't make loans on the property itself |
| themselves! | | | | … which is a whole other story. |
| Here is the reality concerning commercial real estate | | | | Thus, it bears repeating: There are no 100% LTV |
| from a lender's perspective: Commercial real estate is | | | | commercial loan programs! Commercial real estate is |
| considered an investment, not a basic need, such as | | | | for serious investors with equity to risk, a positive |
| a roof over your head. Because investment real | | | | net worth, and an asset that a lender would feel |
| estate is "secondary" to a borrower's personal | | | | comfortable encumbering. So the next time someone |
| residence, it is usually considered a higher risk loan. | | | | approaches you with a map to a pot of commercial |
| Why? | | | | real estate loan "gold" … save your money |
| If the fit hits the shan in a borrower's personal life | | | | for a latte at Starbucks! |
| and money becomes tight, lender's conventional | | | | |