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Hello everyone, I thought I’d start a thread more fixated on the commercial real estate realm. Because it can be somewhat of a different animal, I’m hoping this thread could be a good reference point for anyone willing to share. I’ve decided to dive deeper into this space since the housing market is flooded with everyone and their dog right now. I’m still sending letters and active, but I’m trying to optimize where my energy is spent.
Rookie mistake #1
– I didn’t realize I’d need a commercial lender, I assumed a lender is a lender. Definitely not the case, so I’m working on that now
Question: What will a commercial lender want to know that would be different from a conventional sfh loan?
Do I find the property first then ask for the loan, or do I reach out to get prequalified first? I’m asking this because I assume cap rates and ROI/NOI must make sense before a bank will consider moving forward.
What type of rate should I expect?
Will a lawyer be necessary in every commercial real estate deal?
Thanks everyone
Here’s a good video explaining cap rates for those who don’t know:
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In my experience I tell my lender what type of commercial property I’m looking to purchase and ask for a relationship letter if he’s not able to give me a pre-qual letter. Sometimes the bank board will have to approve the property or the buyer before they give a pre-qual letter, but a bank relationship letter is good to use until then. If you don’t have one you should have your personal financial statement ready to give to the bank, and you can work on getting all the bank requirements while doing your due diligence on the property. Typically on deals I’ve done I see 30 days financing contingency after the due diligence period is over with the option to extend for an additional timeframe, and that’s when you get your appraisal and bank stuff done.
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Thanks for the info..And just as you said, they sent me a personal financial statement form to fill out. I just finished a meeting with a broker. Luckily it sounds like I’ll be approved based on what I told him. Although they prefer more experience than what I have. My plan is too start small in a less desirable area to get my feet wet.
Thanks again
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Im also looking into doing commercial. So far did a lot of SFR, rentals, flips, new construction. But I’m staring to realize you can make more of a return on your time and energy on commercial. Im facing the same issue, trying to find a commercial lender that understands my portfolio. Any luck finding one?
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I don’t even have a portfolio, just own the house I live in right now. Finding a deal that makes sense and then presenting it to the mortgage broker will help a lot. Then the only risk is you as a person, since you have no experience.
So, to get around that, I mentioned I have a mentor in Texas, without saying his name (Tom), who will be guiding me along. I mentioned his 150,000 sq/ft of rentals and they were surprisingly receptive to me after that. It doesn’t sound made up, and it isn’t.
In the meantime I’m still sending letters like clockwork, and I think those will pay dividends down the road.
Also, while prospecting garage sales, I’m finding smaller items to flip and sell on eBay. It’s pretty fun and I knock out two birds with one stone.
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