How to Apply for a Commercial Loan & How to Find the Best Lenders

Today we're discussing commercial loans: how are they different from residential loans, how to find the best lenders, how to apply to these loans and present them to the lender, and what are some of the terms that we get to choose on these loans.



Read the full interview here: https://montecarlorei.com/how-to-apply-for-a-commercial-loan-how-to-find-the-best-lenders/

How should a new investor present a deal to a lender in order to get approved?

Run your credit report up front, accumulate the last three years of your tax returns, put together a personal financial statement, and basically be candid with the lender. If you have anything that you think is going to look badly, like a past bankruptcy or past foreclosure, just explain it upfront.



What are some different loan terms that we as investors would be able to choose from and decide on for commercial properties?

Basically you can choose how much leverage you want. It depends on what the lender's going to offer, but you can get leverage anywhere from 60 to 75 or 80%, we even do 85% of some stuff. Where you have the most flexibility, as a borrower, it's the prepayment. The longer you do your prepayment out, typically the lower your rate is going to be. So whether you do a three year, five year, or ten year prepay, that's really where you have the most flexibility when you're speaking to the lender.



Can these loans be transferred to a new buyer if we decide to sell the property before that three, five or 10 year prepay?

With most lenders, yes. with some lenders no. In today's market, most lenders would transfer, and there's usually a small transfer fee.



How do you recommend people going about finding really good lenders? I see a lot of people posting hard money loans and they really sound like a scam because their rates are so low. How can people make sure that they are really dealing with a legit lender and also a very good one?

There's a lot of scammers in this business, so I'm just being very careful. I would say to talk to other investors, see are they used for lenders and or bonkers and I would really do it that way. I wouldn't just, you, you know, if you're a new investor, just going in on your own, talk to other investors and network, you know, go to the networking groups. It pays to network with other investors. You know, I mean this is an information business or whatever one's one.



A lot of people say that you need to find a local lender where the property is based out of. Is that true? 

No, that’s false, I don’t buy that for a minute. For example, the deal that I shared with you previously that I did in Ohio, it was a retail deal in Cleveland and we got great deal for them, 4.35%, 10 year term. 75% loan to value, with a California lender 2000 miles away. I think there might be a few times where a local lender makes sense, but off of the top of my head, I can’t think of a circumstance.



Were you there back in 2008 doing loans? Do you want to share a little bit about what was going on and how we should be prepared for a potential recession coming up?

Yes, I was. What was going on? Not a great deal. Nothing really. I was actually working at Marcus and Millichap back then and not much was trading. How do you prepare for that? That’s a good point. A lot of people believe, particularly in some of the biggest cities, particularly in multifamily, they think it’s a little frothy right now. The cap rates are sub five. I think looking at tertiary markets, secondary markets, and value add is kind of a protection for that.



Paul Castagna

(561) 306-6852

bedfordlending.com

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Today we're discussing commercial loans: how are they different from residential loans, how to find the best lenders, how to apply to these loans and present them to the lender, and what are some of the terms that we get to choose on these loans.



Read the full interview here: https://montecarlorei.com/how-to-apply-for-a-commercial-loan-how-to-find-the-best-lenders/

How should a new investor present a deal to a lender in order to get approved?

Run your credit report up front, accumulate the last three years of your tax returns, put together a personal financial statement, and basically be candid with the lender. If you have anything that you think is going to look badly, like a past bankruptcy or past foreclosure, just explain it upfront.



What are some different loan terms that we as investors would be able to choose from and decide on for commercial properties?

Basically you can choose how much leverage you want. It depends on what the lender's going to offer, but you can get leverage anywhere from 60 to 75 or 80%, we even do 85% of some stuff. Where you have the most flexibility, as a borrower, it's the prepayment. The longer you do your prepayment out, typically the lower your rate is going to be. So whether you do a three year, five year, or ten year prepay, that's really where you have the most flexibility when you're speaking to the lender.



Can these loans be transferred to a new buyer if we decide to sell the property before that three, five or 10 year prepay?

With most lenders, yes. with some lenders no. In today's market, most lenders would transfer, and there's usually a small transfer fee.



How do you recommend people going about finding really good lenders? I see a lot of people posting hard money loans and they really sound like a scam because their rates are so low. How can people make sure that they are really dealing with a legit lender and also a very good one?

There's a lot of scammers in this business, so I'm just being very careful. I would say to talk to other investors, see are they used for lenders and or bonkers and I would really do it that way. I wouldn't just, you, you know, if you're a new investor, just going in on your own, talk to other investors and network, you know, go to the networking groups. It pays to network with other investors. You know, I mean this is an information business or whatever one's one.



A lot of people say that you need to find a local lender where the property is based out of. Is that true? 

No, that’s false, I don’t buy that for a minute. For example, the deal that I shared with you previously that I did in Ohio, it was a retail deal in Cleveland and we got great deal for them, 4.35%, 10 year term. 75% loan to value, with a California lender 2000 miles away. I think there might be a few times where a local lender makes sense, but off of the top of my head, I can’t think of a circumstance.



Were you there back in 2008 doing loans? Do you want to share a little bit about what was going on and how we should be prepared for a potential recession coming up?

Yes, I was. What was going on? Not a great deal. Nothing really. I was actually working at Marcus and Millichap back then and not much was trading. How do you prepare for that? That’s a good point. A lot of people believe, particularly in some of the biggest cities, particularly in multifamily, they think it’s a little frothy right now. The cap rates are sub five. I think looking at tertiary markets, secondary markets, and value add is kind of a protection for that.



Paul Castagna

(561) 306-6852

bedfordlending.com

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Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support