100% leverage is always possible, but not appropriate for anything except a
deal with considerable upside.
My advice would be to first make sure you have maximized the value of your
current holdings, and then evaluate each for refinance, sale or exchange to
access capital.Transforming a portfolio and growing in the process takes two things—time
and a plan—and more of the latter than the former.
You can get 85-90% LTV
rather easily for loans of the approximate size you mentioned ($500K – $1.5
million). However, since 80% LTV is the normal maximum for commercial loans for
apartments and Mobile Home Parks, this higher LTV will usually result in a
second from either the/a lender or the seller. Usually this second is a
short term loan that carries much higher rates than the first. Some lender
programs out there will do the 1st and 2nd at the same rate. But that means
the larger 1st is at a much higher rate than what one would normally expect.
A seller second (if allowed by lender) can be your best scenario. Many times
a seller in an effort to help the deal close, is willing to accept terms
that are better than you could ever hope for from a lender.
Most long term mortgage brokers has worked as an investment banker for a while doing commercial RE loans. And
yes, they get requests from people to do 100% LTV loans. And their answer??
If we’re putting 100% into it, shouldn’t we own the place outright?? Why
lose a bundle first, and then foreclose on it, and then own it outright.
Bankers believe that someone with no stake would take imprudent risks.
And why is this different than residential loans where there are high LTV
products available?? That’s because in residential markets, government’s
intervention in the capital markets thru Fannie Mae and Freddie Mac made it
possible. The public interest here is the advancement of home ownership.
Anything comparable in the commercial markets??
Yes, if the investment advances a public interest such as economic
development and job creation. But these organizations generally deal with
experienced investors, or developers with a good track record.
And does giving investors 100% or high LTV commercial loans, but just to
speculate on, advance the public interests?? I couldn’t think of any good
reasons where it would.
In your case, the best thing is 1031 your equity from the residential
properties into something larger.
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Tags: commercial mortgages, finance commercial real estate, mortgage markets, Private Money, real estate investing
January 9, 2008 at 4:29 am |
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A massive shift is currently underway in the mortgage industry that has NEVER been seen before that is severely affecting thousands of Mortgage Professionals,yet most do not fully understand the seriousness of it…yet. In fact, experts are now calling this “unprecedented disruption” that is going to change the entire landscape of this industry for the worse for years to come, so listen closely…
If you’re still in the trenches right now, fighting for every last loan approval,yield spread premium or basis point, then you are in for a rude awakening my friend, because the times have officially changed and they ain’t ever going back.
The good news is…
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Don’t miss this!
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Warm regards and my best wishes for a great 2008!
Gilda Orlandi
October 9, 2008 at 1:02 pm |
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March 26, 2009 at 12:43 am |
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