I want to build a set of commercial store fronts, +\- 7000 sq ft, and put a second location of my wife’s business in one unit. How on earth do I get the down payment $$$?
After evaluating how much money we have been putting in someone else’s pockets at my wife’s business location (5 year lease - $25/sq ft), we realized that if we can figure out finances, it’ll be WAY better to buy land and build and become a commercial property developer.

I have done basically zero research, though I have reached out to a trusted commercial RE agent to get an idea on total cost. Overall costs look reasonable, however the 20% down payment is huge! Especially if it is on a $1MM to $3MM deal. 

So, can anyone help me out on how they secured their first commercial RE deal? What types of lenders to avoid or seek out? Strategies for raising the down payment capital? Books/podcasts to read/listen to?

Thanks!!
[{"id": "gpsehbb", "text": "There is not really a way around the high down payment, IMO. Especially for deal #1.", "replies": [{"id": "gpsgbvn", "text": "Thanks for the comment. So most people are raising the capital on their own and just paying cash for the first deal down payment?", "replies": [{"id": "gpsinz8", "text": "Either that or have a super long term lease already set up. It\u2019s hard if it\u2019s your own business vs a Starbucks or Walmart. This is one of the many reasons why people rent forever.", "replies": [{"id": "gqaqe4j", "text": "That plus two other reasons: commercial development isn't easy or cheap. You rarely stay in budget (especially the first one) even if there aren't any speed bumps. Up front cost is the equity plus TI and LC. The other reason is many times it doesn't make sense to build or own. If the margin on the operation of the business is more than the return on owning the real estate it makes more sense to rent. This is why Starbucks, Walgreens, most restaurants, and countless other national credit retailers lease and why grocery/Walmart/car dealerships own. On top of that you become a landlord so you've built yourself a job.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gpseu0x", "text": "Partner with a developer.", "replies": [{"id": "gpsg8cd", "text": "Awesome. How would go about seeking one out?", "replies": [{"id": "gpt4i20", "text": "Look around your area and find new construction buildings similar to what you want to build. Google the address and you should be able to find the municipal application with the applicant\u2019s name being the developer. Give the developer a call. Experienced developers should also have a network of private lenders and partners with money to help with financing as well. \n\nIts a lot easier to get a commercial building financed if you can approach lenders and say \u201cwe already have x% of the building committed to be leased out\u201d. So you have that going for you. Good luck!", "replies": [{"id": "gpta5u7", "text": "Awesome info, thanks!", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gpsgx31", "text": "Depending on the market, if you\u2019re talking retail this might be the best time to find a vacant building. I\u2019d find a partner where you could potentially land a building that is partially/mostly/entirely vacant, put you\u2019re wife\u2019s business in one unit. This will make a vacant building more attractive with higher occupancy, an investor will save on downtime/leasing commissions, and you might be able to get favorable owner occupied financing. PM me your market/general location of where you are looking for would be interesting to see if there would be options similar to what I\u2019m describing.", "replies": [{"id": "gpshnmr", "text": "Will do, thanks!", "replies": [], "depth": 2}, {"id": "gq27aum", "text": "I agree. This is not the time to learn how to develop retail. Specially since so much of it is distressed.", "replies": [{"id": "gqyvfea", "text": "In", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gpstyqy", "text": "How big is the space your wife will be using? If it's 51% of the total building, you can do an SBA loan with only 10% down.", "replies": [{"id": "gpta9tv", "text": "We only need 1000-1500 sq feet. So we were hoping to build big enough to support 4 total tenants", "replies": [], "depth": 2}], "depth": 1}, {"id": "gpt0q7w", "text": "Start saving up money now.", "replies": [{"id": "gptaacc", "text": "Thanks!", "replies": [], "depth": 2}], "depth": 1}, {"id": "gpt8jw9", "text": "SBA financing with 10% down, assuming you be will occupying 51% of the space on an existing building. Of course you still need to meet the underwing guidelines. Typically, you will need 35% equity or 1.20 debt coverage ratio for the cash flow for the loan (usually lesser of the two on how much you can borrow).  As others suggested, I would not do a ground up development, too much risk for your first deal without having any experience and just buy an existing building using SBA financing. Of course you can also do a JV with someone with capital or some that already owns the land but you have less control and have negotiate on the terms.", "replies": [{"id": "gptacln", "text": "Thanks so much for the advice", "replies": [], "depth": 2}, {"id": "gptaral", "text": "I\u2019m not sure if the SBA 504 program works with development", "replies": [{"id": "gptvlt1", "text": "That is true. In addition, entitlements for ground up can take a while assuming you do it by right but in Cali it can take up to 2 years by right. And now lumber prices are crazy high now, up to 80% more than before.", "replies": [], "depth": 3}], "depth": 2}, {"id": "gptjyvv", "text": "This is excellent advice.  There's more to borrowing than just filling out docs and providing some equity but....truly, the SBA has some stunning deals out there that are, in some ways, about as simple as \"can you fog a glass?\"\n\nThat's a bit over simplified but....the deals being offered today make most seasoned CRE guys salivate.", "replies": [{"id": "gptzne6", "text": "I\u2019m in escrow on a 30,000 square foot business place in which my business will operate 51% -\n\nSBA financing - 10% down - \nBank of America is doing 1% interest for 18 months and then it goes to 2.8%. SBA is doing it for roughly 2.6% percent. Origination fees reduced to $20,000 and SBA is going to pay $9,000 per month for the first 6 months.\n\nIt\u2019s shockingly cheap lol", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gptjmq9", "text": "I started in 1985 with one condo, rented it out for cash flow.\n\nSold that 4 years later for a slight profit, bought 2 condos, rinse, repeat.\n\nGot lucky and hit a streak of local inflation (\"luck\" wouldn't have meant skadditch had I not bought the condos). Sold those, bought 5 condos.\n\n5 years later sold the condos, bought my first commercial property (for my company).  It was a shit hole.  Old house on 3 acres, industrial area...the price was \"*all the money on the planet*\" (to me)...it squeezed everything I had that could be squeezed.\n\nOver the next 20+ years I did everything I could whenever I had extra cash to improve the place, paved it, painted, added space (sf'g). Sold it for a bit over 4 times what I paid for it when my bank was sold in 2010'ish during the end of the world 2008 banking mess and the new bank called in every loan on the books of the acquired bank (my bank) even though I'd never missed a single payment but didn't have the capital to pay it off (I'd refi'd it 8 or so years earlier to lower the rate and grab some cash to invest in the business).\n\nMy businesses were suffering due to the great recession, so I pocketed the difference, paid off a bunch of debt and 2 years later bought a medical building in distress that was extremely undervalued. Have been doing the same thing to this asset that I did to the first commercial site:  Doing little things bit by bit as each day and year goes by, making the place better for tenants and my cash flows.\n\nCommercial real estate is fairly simple if you play the long game.  Extremely complex, painful and loaded with landmines if you try to play a short one.", "replies": [], "depth": 1}, {"id": "gptrvia", "text": "Dude..... you gotta under write way more.  Building is awful right now. Costs super high.  Hard to source shit.... I would rent. Will be so much vacancy for a while. Leverage that to get cheaper lease\n\nIf you got the money invest it in b and c class Mfr", "replies": [{"id": "gpts19y", "text": "Thanks for the tips and the perspective on the market.", "replies": [{"id": "gpts7k6", "text": "No problem. I have about 20m in holdings.  Most is B AND C class MFR.  it\u2019s way easier to make money in it than developing right now.  If she\u2019s doing well, fuck holding where she owns. Take that cash and buy some duplexes and get your feet wet. Easier to liquidate too if REI ain\u2019t for you.  \n\nGood luck", "replies": [{"id": "gptvioo", "text": "Would you mind if I send you a PM?", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gpzkm7f", "text": "Your wife needs to apply for an SBA loan. That\u2019s going to be your best option for having the lowest down payment.", "replies": [{"id": "gq8rdby", "text": "Why his wife, better rates/deals for women through SBA?", "replies": [{"id": "gqd38y2", "text": "The SBA has programs for women owned businesses", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]