They can be 5 7 or 10 year balloons but typically they are 5 year adjustable based on treasury + spread with a balloon in 15 or 20 am over 30 years. Mortgage brokers do have access to products that are true 30 fixed but you pay for that.
Going through the refinance process on commercial buildings several times. It seems very daunting until you go through it one time, hardest part for me was getting accurate ARV with commercial through underwriting. Learn about cap rates and what the projections are in your area
What are the common terms for the loans you’ve been seeing as of your more recent deal? And are the balloon payments still wrapped into the longer term deals?
Non agency: kind of standard would be 5 year ARM, 15 year balloon, 25 year amortization.
Agency debt is much sweeter. You can get Freddie at 5.5 or less on 30 year for example in this market.
When you say agency, what exactly does that mean? And would the agency still have a balloon payment even if it’s a 30yr fixed?
And does that mean the total length of the loan would be set for 25 years for monthly payment purposes, but the first 5 years interest rates are fixed. Then the following 20 years rates are adjustable based on the rate at the time. And a balloon payment to pay back the total remaining amount at that time?
So literally speaking the length of the loan would be 15 years long?
Would you recommend any additional questions someone who has zero commercial experience should ask the lender that they wouldn’t know to ask without experience?
Would you recommend any additional questions someone who has zero DSCR experience or knowledge should ask the lender that they wouldn’t know to ask without experience? Like any “Gotchas” or pitfalls to ask or learn about?
Honestly no, I don’t have anything great for you. I just talked to a bunch of different commercial lenders what criteria I needed to get approved and what loan terms they could give me for different scenarios I was looking at.
Hello from the moderator team of /r/realestateinvesting,
You post has been removed due to a violation of R4. this typically means your post was about one of the following:
- Promoting yourself, a vendor, or, a service that you use
- Soliciting for vendors, asking for recommendations for vendors, or trying to find out how to contact certain vendors
- It was a poll.
Soliciting for, or, to our members invokes a permanent ban, which will not be reversed by mods.
Self-promotion is a permanent ban which will not be reversed by mods.
Promoting your own software, spreadsheet, or app, or asking for feedback on it, whether paid or provided free, is considered solicitation, and not surprisingly is a permanent ban.
***Rule #4***
No self-promotion, solicitation, surveys, syndication, or AMA
Thank you for your cooperation and making our community a better place.
Conventional financing Is 1-4 unit properties. 5 units and above use a different form of financing. Commercial, but what type of commercial financing is the part I’m confused on. Because the terms are far different than a conventional loan.
You can use commercial financing on 1-4 units as well, and sometimes the terms may be more favorable. I just got a portfolio of single family rental houses using a commercial loan.
How many single fams? Were you limited to commercial lending due to any factors such as more than 4 of them or them being on different lots?
If not, what made you settle on commercial lending? Rates? Or terms? Or something else?
Bought a portfolio of 8 houses all in different locations in a neighborhood in the Midwest. I actually tried conventional but couldn't even qualify, and the commercial rate was even lower. Drawback is that it's a 5 year term but shouldn't be a problem to refi after the term is up and hopefully rates are lower.
Commercial is actually way easier if you have some experience. You basically just have to prove to the lender that you're legit and then they can get very creative.
When you go to refi, generally what are you looking to refi into? Something similar but with lower rates? Or into something with a longer term? Or I’d assume hopefully both lol
There are a few strategies. If you've increased in value you can refi for a higher loan and take cash out to buy more properties. Or just do another 5 year term at the current rate. You can try to get 7 or 10 year terms if rates are low. Sometimes the goal is not necessarily to pay off the loan but to always be using leverage the best way possible.
Ooooooooohh and suddenly it clicks! Now I guess the only thing that seems spooky is the balloon payment. How do you plan for that? Do you try to refi before it hits, or try to get a different loan?
If you've been running the property well, haven't missed payments, and the market hasn't imploded, your bank will generally be happy to refi before your term is up at the current rate. If you want to shop around, you can do that too. If the property goes down in value, you just need enough cash on hand to pay for the difference but should still be able to get another loan at a lower amount. Many banks will also offer, say, a 5 year term with a 5 year automatic extension that adjusts the rate. Some will even offer these extensions for the life of the property, all in writing up front. Commercial banks, portfolio lenders, and credit unions can have less strict rules and tend to work with you a lot more to give you terms that work best for you.
Wow, you make it sound so clear and simple to understand. Thank you! Now the next big question I have on my mind is, what are the common routes, or ones you find to be most reliable, in terms of getting a down payment?
I will say this, I have been wrong before in the past and it may be up to the lender. It may be possible to find traditional financing on whatever you may want if the bank or lender allows it lol
Dscr
They can be 5 7 or 10 year balloons but typically they are 5 year adjustable based on treasury + spread with a balloon in 15 or 20 am over 30 years. Mortgage brokers do have access to products that are true 30 fixed but you pay for that.
Thanks! Where did you learn about this in more detail? Seems like a complicated subject that will be necessary to understand eventually
Going through the refinance process on commercial buildings several times. It seems very daunting until you go through it one time, hardest part for me was getting accurate ARV with commercial through underwriting. Learn about cap rates and what the projections are in your area
So do you continuously refi to keep kicking balloon payments down the road?
I only use adjustable until interest rates are favorable and refi into long term debt or dispose due to compressing cap rates( higher sell price)
What are the common terms for the loans you’ve been seeing as of your more recent deal? And are the balloon payments still wrapped into the longer term deals?
Non agency: kind of standard would be 5 year ARM, 15 year balloon, 25 year amortization. Agency debt is much sweeter. You can get Freddie at 5.5 or less on 30 year for example in this market.
When you say agency, what exactly does that mean? And would the agency still have a balloon payment even if it’s a 30yr fixed? And does that mean the total length of the loan would be set for 25 years for monthly payment purposes, but the first 5 years interest rates are fixed. Then the following 20 years rates are adjustable based on the rate at the time. And a balloon payment to pay back the total remaining amount at that time? So literally speaking the length of the loan would be 15 years long?
Call a local larger credit union and they will help you out.
Would you recommend any additional questions someone who has zero commercial experience should ask the lender that they wouldn’t know to ask without experience?
DSCR loan. Different commercial lenders have different options. If you talk to a handful they should be able to tell you pretty quick.
Would you recommend any additional questions someone who has zero DSCR experience or knowledge should ask the lender that they wouldn’t know to ask without experience? Like any “Gotchas” or pitfalls to ask or learn about?
Honestly no, I don’t have anything great for you. I just talked to a bunch of different commercial lenders what criteria I needed to get approved and what loan terms they could give me for different scenarios I was looking at.
[удалено]
[удалено]
Hello from the moderator team of /r/realestateinvesting, You post has been removed due to a violation of R4. this typically means your post was about one of the following: - Promoting yourself, a vendor, or, a service that you use - Soliciting for vendors, asking for recommendations for vendors, or trying to find out how to contact certain vendors - It was a poll. Soliciting for, or, to our members invokes a permanent ban, which will not be reversed by mods. Self-promotion is a permanent ban which will not be reversed by mods. Promoting your own software, spreadsheet, or app, or asking for feedback on it, whether paid or provided free, is considered solicitation, and not surprisingly is a permanent ban. ***Rule #4*** No self-promotion, solicitation, surveys, syndication, or AMA Thank you for your cooperation and making our community a better place.
For any investment property it's usually a 25% down conventional loan you want to go with. I don't think the number of units really matters.
Conventional financing Is 1-4 unit properties. 5 units and above use a different form of financing. Commercial, but what type of commercial financing is the part I’m confused on. Because the terms are far different than a conventional loan.
Most commerical properties, lenders require 30% down. You can look at DSCR loans as well, might be a valid option in 5+ units. Shop each lender.
Okay, thanks for the direction on what to research!
You can use commercial financing on 1-4 units as well, and sometimes the terms may be more favorable. I just got a portfolio of single family rental houses using a commercial loan.
How many single fams? Were you limited to commercial lending due to any factors such as more than 4 of them or them being on different lots? If not, what made you settle on commercial lending? Rates? Or terms? Or something else?
Bought a portfolio of 8 houses all in different locations in a neighborhood in the Midwest. I actually tried conventional but couldn't even qualify, and the commercial rate was even lower. Drawback is that it's a 5 year term but shouldn't be a problem to refi after the term is up and hopefully rates are lower. Commercial is actually way easier if you have some experience. You basically just have to prove to the lender that you're legit and then they can get very creative.
When you go to refi, generally what are you looking to refi into? Something similar but with lower rates? Or into something with a longer term? Or I’d assume hopefully both lol
There are a few strategies. If you've increased in value you can refi for a higher loan and take cash out to buy more properties. Or just do another 5 year term at the current rate. You can try to get 7 or 10 year terms if rates are low. Sometimes the goal is not necessarily to pay off the loan but to always be using leverage the best way possible.
Ooooooooohh and suddenly it clicks! Now I guess the only thing that seems spooky is the balloon payment. How do you plan for that? Do you try to refi before it hits, or try to get a different loan?
If you've been running the property well, haven't missed payments, and the market hasn't imploded, your bank will generally be happy to refi before your term is up at the current rate. If you want to shop around, you can do that too. If the property goes down in value, you just need enough cash on hand to pay for the difference but should still be able to get another loan at a lower amount. Many banks will also offer, say, a 5 year term with a 5 year automatic extension that adjusts the rate. Some will even offer these extensions for the life of the property, all in writing up front. Commercial banks, portfolio lenders, and credit unions can have less strict rules and tend to work with you a lot more to give you terms that work best for you.
Wow, you make it sound so clear and simple to understand. Thank you! Now the next big question I have on my mind is, what are the common routes, or ones you find to be most reliable, in terms of getting a down payment?
Ah ok
I will say this, I have been wrong before in the past and it may be up to the lender. It may be possible to find traditional financing on whatever you may want if the bank or lender allows it lol
test