Financing options for commercial prosperity with individual investor
Hello all. Totally new to commercial properties but I’m eyeing to purchase a small single tenant warehouse (long term tenant in place already) in a rural town. The asking price is roughly 1mm, and I can potentially put 30% down. As I’m an individual investor, I was wondering what are some of the financing options available for me, and what are the general lending terms for commercial properties. I’ve heard SBA loans ranging from 3% for 25 years to commercial loans at 6% for 5-10 years. 

Would it make sense to form a LLC, and use myself as guarantor to acquire the property?

Would love to have some insight and guidance from experienced experts here. Thank you.
[{"id": "gt5z6dd", "text": "You can\u2019t use an SBA to purchase an investment property. Your operating business needs to occupy 51% of the building or 60% of the building if it\u2019s new construction. \n\nIf you\u2019re a first time investor you should be more conservative with your LTV. Buy a smaller property.", "replies": [], "depth": 1}, {"id": "gt5z9jz", "text": "Definitely want an LLC. You\u2019ll have to guarantee the loan. What is your plan to replace the tenant if it goes dark? Can you float the note and TI for a new tenant?\n\nI\u2019m a warehouse investor and CRE lawyer. I\u2019ll let someone else comment on financing options. What\u2019s the cap rate? NNN?", "replies": [{"id": "gt69jm2", "text": "NNN yes. Cap 6.5%", "replies": [{"id": "gt6wti1", "text": "Why do you have a different username than OP?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gt676j1", "text": "I use my smaller local bank for financing on this type of property.  If you  already bank somewhere like that, it's even easier as they at least know something about you.  Try calling a bank like that and speak with the commercial lending department.  They can answer everything you'll need to know.", "replies": [], "depth": 1}, {"id": "gt6na7e", "text": "Commercial financing advisor here.\n\n70% leverage is the MOST you are going to find as a newbie with single tenant risk. You'll need to shop and compare different banks and credit unions in the region, and present a solid package to convince them to fund you.\n\nIt will be Full Recourse. Your net worth matters, and you'll need to demonstrate enough liquidity that you have at least 10% of the loan amount in cash remaining AFTER closing.", "replies": [{"id": "gt6wtou", "text": "Excellent advice.", "replies": [], "depth": 2}, {"id": "gt6xmog", "text": "How much does this change with property type? Eg, a multifamily property with 10 or 15 tenants (vs the single tenant warehouse). Would that similarly be 70pct LTV max?", "replies": [{"id": "gt79d5a", "text": "75% would be more common for multifamily, often with 25 year amortization. 80% is possible, but depends on other factors including location.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gt6wqvf", "text": "SBA is virtually free money at this time but, never fail to ask the seller if they'd like to carry a note for 5, even 10 years.\n\nMany are terrified of the prospect of finding a new home for all that cash and would feel quite comfortable lending you 70% at market so they continue getting a monthly stipend, but don't have to fix any more toilets.\n\n(I've bought 2 properties this way).", "replies": [], "depth": 1}, {"id": "gt702cg", "text": "Is there a particular reason you want to start w/ a warehouse that only has 1 tenant (aka that 1 tenant goes under... your fucked.)\n\nCompared to an apartment building... or mixed-use building?\n\nAs far as financing goes. LLC, you'll still need to pledge personally. 20% down would be the very least, most likely 25-30% since it's your first.\n\nYou won't be able to use SBA unless you occupy 51% of the space.\n\n\nAs far as rates go, i'm closing on a commercial building at the end of this month @ 3.75%/25 amm/5 year term.", "replies": [], "depth": 1}, {"id": "gt7ckk8", "text": "Didn\u2019t read. Talk to a broker.", "replies": [], "depth": 1}, {"id": "gtocf2v", "text": "The reply above claiming 70% LTV is the best you\u2019ll get is 100% wrong, it doesn\u2019t matter if you are first time or not. I did 20% down 25 year amortization for my first commercial deal on a $2.2mn medical office building with one tenant and one floor vacant. I got it at an 11 cap given the vacancy and the first floor tenant was on a 1 year lease. This was 2019. Since then I have done 3 more deals all with 20% down. Smaller banks and credit unions will do 20%. I have a friend that bought a Family Dollar in PA with 15% down and he lives in MA. Call around to multiple small banks and credit unions. You should put it in an LLC to separate it from your personal assets and shield you from liability but banks will have you sign a personal guarantee on the loan with 20% down. I\u2019ve done this for 8 years (used to buy multi family residential). Commercial deal financing is all about the NOI of the deal, quality of tenant and quality/length of lease", "replies": [], "depth": 1}]