Forming LLC, Investing into Apartments, &amp; Commercial Loan
I was wondering how complicated the process would be to attain my first commercial piece of property. I currently own 3 SFH, and 1 Duplex. Everything has been going well for the last 3 years, and I wanted to move forward towards my first Commercial Multifamily.

I wanted to know the technical startup path to get this going. The reason to go commercial was so I can have my brother and some other partners invest in my venture. I wanted to set up an LLC that is split 70/10/10/10. I am going to be the main investor, and doing all of the work. I was hoping to help get some people into investing, and thought a larger project would be a good start where they can sit back and ask questions as I take everything on.

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Second, when applying for a Commercial Loan, how different is that than a mortgage? Lets say a property is selling for $500k. Is the down still 20% &amp; 15/30 year mortgage or will it be a smaller term loan? I keep looking around and I don't know exactly what to do, and I dont want to waste a bankers time with a lot of information I wouldnt be moving forward with for about a year.

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Much appreciated.
[{"id": "eehytol", "text": "No experience but I heard down payment is closer to 30%. Maybe use hard money to buy a fixer upper and refinance out with the forced equity?  Idk may be easier to get the loan", "replies": [], "depth": 1}, {"id": "eehyvnb", "text": "3-10 year term and 20-25 year amort. So you are refinancing every so often. \n\nOtherwise pretty similar. You will still be personally guaranteeing the loan.  Banks will want to see deals with 1.25 debt coverage ratio more than likely.\n\n", "replies": [], "depth": 1}, {"id": "eei0f65", "text": "Typically a commercial loan is more like 5 year term, 20 year amortization. 25%down minimum. Generally. Depends who you work with of course. ", "replies": [{"id": "eei0wun", "text": "So basically that would be a 20 year loan, and I refinance after 5 years. Then after refinance I would more than likely go 15 years, etc...\n\nI was for a second thinking a 5 year loan period. That would be rough. Any generally recommended lenders or avoidable ones?", "replies": [{"id": "eei26v3", "text": "Right after the 5 year term, you would need to pay it off or refinance. Its paid down at the rate a 20 year would be. You understand. \n\nLenders really depends. I larger client of mine uses wells Fargo, because he has A LOT of business with them he gets pretty good offerings. I would never use wells Fargo, I use a smaller more local or regional bank. \n\n", "replies": [{"id": "eei27cs", "text": "Hey, baumbach19, just a quick heads-up:  \n**alot** is actually spelled **a lot**. You can remember it by **it is one lot, 'a lot'**.  \nHave a nice day!\n\n^^^^The ^^^^parent ^^^^commenter ^^^^can ^^^^reply ^^^^with ^^^^'delete' ^^^^to ^^^^delete ^^^^this ^^^^comment.", "replies": [{"id": "eei28zx", "text": "Thanks I have changed it. ", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "eei5ud4", "text": "typically need 20% down or 20% to 25% of the total cost (you can roll capex into the loan depending on the lender), since you are a first time borrower, you arent going to get the same kind of leverage that more experienced borrowers are able to get. Also, your rate will be a little bit higher. Term, I/O, rate, all vary depending on the lender. But most offer 30 year AMs bcs thats what the agencies offer. Personally, I wouldnt do anything until you can do a $1M+ loan...Freddie Mac SBL is an amazing program with a ton of different options. Still going to need a 1.25 going in dscr. ", "replies": [], "depth": 1}, {"id": "eeice5a", "text": "I do 15 percent down in one market, 25 percent in another ", "replies": [], "depth": 1}, {"id": "eeiz8gw", "text": "Talk to a tax accountant before incorporating. \n\nYou might want to do a limited partnership with you as general partner and investors as limited partners. LP would own the LLC which would own the building.  \n\nTalk to a tax guy. Also a CRE lawyer.  Lawyer should do the paperwork not five-dollar-LLC.com.  \n\nThese conversations aren\u2019t free but will save you money, time, and relationships come tax/lawsuit/dissolution time.  ", "replies": [], "depth": 1}, {"id": "eejaiqj", "text": "I\u2019m a CRE lender at a bank. There are 5 main sources of financing for commercial real estate:\n\n1. Banks - 3-5 year term. 20-30 year amortization. Commonly used for construction loans, acquisitions that require renovations, or financing that requires greater flexibility. Typically floating rate, unless you purchase an interest rate swap.\n\n2. Agency conduit (for multifamily) - 10-30 year term. Typically 30 year amortization. Used for stabilized multifamily only.\n\n3. Life Insurance Companies - 10-30 year term. Typically 30 year amortization. Almost always used for\n\n4. CMBS - 10 year term. Fixed rate. Pre-payment penalties. 30 year amortization typically.\n\n5. Debt Funds - 5-10 year term. Typically priced much higher than all of the other types of financing. Will push leverage.\n\nMost of these like to see 35-40% down unless you have a lot of money behind you.\n\nTime to close could be 2-3 months, so plan on 4 months to give yourself some wiggle room.\n\nLocal/regional banks are likely to be the most aggressive on terms and pricing. Their perfect situation is where they become your lender of choice as you scale your business. The JP Morgans, Bank of Americas, and Wells Fargos likely won\u2019t even look at financing your deal unless the loan will be at the very least $10 million.\n\n\n", "replies": [], "depth": 1}]