I have a quick question about down payments and the lowest possible rate I can go?
Im very new to the commercial real estate game and I’ve heard people say I need 25%-40% down. What’s the minimum I need to put down and can I put down lower than 15% without a SBA?
[{"id": "hlzpxo7", "text": "Unlikely. SBA will let you go down to 10 percent, bit they require you to jump through a lot of hoops.\n\nStandard commercial real estate loan at local bank is 25 to 30 percent down. Terms currently are around 3.5 percent for 5 year money, with 20 to 25 year amortization.\n\nBest of luck in your journey", "replies": [], "depth": 1}, {"id": "hlzpyif", "text": "Typically no. Unless you want hard money. Then you are looking at rates that are triple the traditional permanent debt.", "replies": [{"id": "hm07jik", "text": "Bringing in 33% the cash and paying 3x the interest can often be cheaper when blending cost of equity.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hlzrd7r", "text": "Find u/SF_Lady, read her posts for about 3 hours.\n\nYou'll find your answer.\n\n*(On another note; Banks and lending institutions aren't the only source of inexpensive money).*", "replies": [{"id": "hlzscof", "text": "She has 7 posts and one about CRE lending, I did read that and it was informative so thanks for that but what other ways are there other than banks and hard money for low down payments?", "replies": [{"id": "hm078lw", "text": "If all you counted was 7 posts of hers, I have a bridge to sell you.\n\nAs to financing, there are myriad other options.", "replies": [{"id": "hm1gwfm", "text": "It only shows me 7\ud83e\udd37\ud83c\udffb\u200d\u2642\ufe0f", "replies": [], "depth": 4}, {"id": "hm1r3ns", "text": "You are confusing posts for comments.", "replies": [{"id": "hm1vgak", "text": "Ahhhhh.  Excellent point.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "hm28amp", "text": "Thanks for the shout out. Okay, so the reasoning behind putting 25-40% down is called \u201cskin in the game\u201d. CRE lending is different than residential lending where you can purchase a home with next to nothing of a down payment. \n\nYes, the SBA offers very low down payment options because the loans are government guaranteed.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hm0mdom", "text": "Lowest SBA is 10% but you'll have to cross collateralize 5% with your personal residence. 15% if no cross. You may be able to do 20% conventional if it is an owner/user property...otherwise you're looking at 35-45% depending upon property type. I have a client buying an apartment building in LA and they are having to put down 51%.", "replies": [{"id": "hm13iq7", "text": "Why wouldn\u2019t they just go high octane bridge on it rather than put down 51%? Like bridge prices to mid 3s on the high end right now", "replies": [{"id": "hm47enm", "text": "No, bridge prices are not in the 3's right now. Bridge loans range from 5.99 to 7.99% for apartment buildings.", "replies": [{"id": "hm48ect", "text": "From who? I haven\u2019t seen anything that high unless you\u2019re going super deep into the capital stack and even at that the mezz piece might price to like a 10% for the 75-90% tranche even on a lease up deal. You\u2019re all in rate if you go to 90 might blend out to mid 4s but no one is pricing that high on multi. I guess my caveat is that I only work on institutional multi but I haven\u2019t seen a spread that high in like years.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hm172tt", "text": "SBA doesn't do pure investment property.  You will need to chin an owner occupied metric to qualify for an SBA loan.", "replies": [], "depth": 1}, {"id": "hm7j7j4", "text": "Here is what I have done.\n\n- Seller financing - you can get 100% financing especially if they have a big gain\n- Lease option - you pay improvements and close once it's performing\n- If you're buying multiple parcels from the same seller, seller carry on one and bank financing on another.  Seller gets cash and you get a higher LTV.\n- Seller to loan you down payment money with a 2nd on another property\n- Bring in private party lender\n- Get a really long escrow/closing period to make improvements", "replies": [], "depth": 1}]