I need help with a bridge loan to purchase a building in Connecticut
I can put 20% down (or more). The total cost for the building is $550,000. I think the best path is to secure the building first. Get it rented (I will move my own business into the building and rent it from myself). Once the building is renovated and rented I will then repay the bridge loan with a conventional loan. I have done 4 residential flippers before but never with a private or hard money loan. I am afraid that working directly with my bank might take too long. The selling wants to move fast. The selling price is well below what I think the building is worth. Can anyone in this sub help me and/or point me in the right direction?
[{"id": "hws54ka", "text": "If you can request additional time from the seller I would encourage that. Maybe offer more earnest money. Reason being that you could work with your bank to get a short interest only period that converts to a permanent loan that would allow you time to make any improvements that you'll want and then start amortizing like normal. Since it will be owner occupied, you should be able to get more favorable terms and then you wouldn't have to pay closing costs twice.", "replies": [{"id": "hws6iri", "text": "The seller is looking to wholesale off a bunch of properties and they don't want to deal with delays. The reason my offer went through when another offer didn't was not the price but that I said I could close fast. I am afraid that working with the bank will take too long. I need to put down cash on this deal within 30 days. The upside is that I am getting about a 30% discount on the property.", "replies": [{"id": "hws7gve", "text": "Wholesale off a bunch of properties? \n\nSounds like a great arbitrage opportunity, depending on location and property type. DM for details?", "replies": [], "depth": 3}, {"id": "hwsrlww", "text": "I see. I think that your only choice then is to look for a hard money lender or friends/family for a short term loan to close. Yeah, it will be expensive, but since you're getting the property for below market that it may not matter as much in the long run. I would go ahead and start conversations with your bank lender though because that hard money rate is going to be 10%+ and if you can get your bank lender to close within 45-60 days (which should be no problem), then you can minimize the time you'll spend under a high rate. You'll pay closing costs twice either way so the only consideration left is minimizing the time that you keep that hard money loan. Either way, start talking to them ASAP because they will be able to provide you with further loan guidance and maybe a referral to a hard money lender as well. Good luck!", "replies": [], "depth": 3}, {"id": "hx9zmj6", "text": "I\u2019m in Connecticut and may fund this - would it be possible to arrange a phone call or a coffee meeting?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hws59oc", "text": "If you have 20% to put down, and the property is $550k it sounds like you may  have the cash to encourage the seller to owner finance or create a lease option for the property. \n\nIt reduces your money out of pocket and gets the deal done quickly.", "replies": [{"id": "hws61o0", "text": "Great idea but the issue is it's a big corporation that owns it and is liquidating a lot of their commercial real estate. They don't want to deal with owner financing.", "replies": [{"id": "hws6win", "text": "You can always try LinkedIn to find the right lender for your deal. I find a lot of success there for my opprunities.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hws87hu", "text": "Private money loan officer here. \n\nIt sounds like the property is vacant as it stands right now, so a bridge loan is probably all you will qualify for. The 4 residential flips is alright experience but not directly applicable to this commercial building but it still helps. I know you say you have money for 20% or more to put down, but down forget you\u2019ll need money for appraisal, reserves and closing costs (underwriting, origination points etc). Because the property isn\u2019t stabilized and it\u2019s your first commercial property you\u2019ll probably get a higher interest rate than someone who has more applicable experience. But that\u2019s okay because this is a short term loan. Bank will take 60-90 days to close, private money will take about 30 once you get your docs in to them. \n\nGods speed brother.", "replies": [{"id": "hwsrm77", "text": "Thanks. Very helpful. Sounds like you know exactly what I'm up against. I'm going to my own business bank on Monday to see if they will work with me the bridge loan. A conventional commercial won't work yet but after renovation and lease it should be smooth sailing. The building is vacant now. Was formerly a small bank building. 5000 sq/ft.", "replies": [], "depth": 2}, {"id": "hwyxx61", "text": "Spoke to the bank today and they said that they can't do it in 30 days, they said 45 days minimum. They are happing to work with me on paying off the bridge loan once I get the building occupied and leased. So, I think my only option is to go with a private money loan. I can make personal guarantee on the loan. I'm shopping it around now. Sounds like I'll end up with 8% to 12% interest only with some type of minimal payment even if I pay it off early. Does that sound about right to you?", "replies": [], "depth": 2}, {"id": "hwz4ca1", "text": "That\u2019s 45 days minimum after you get them the millions docs they\u2019ll ask for and you get those tenants in place. So the bank route will take months. \n\nYes 8%-12% is expected for a 12 month bridge loan. Considering no commercial experience and the property is not stabilized I\u2019d expect 10-12%. 0 prepay penalty. Probably around 70ish% LTV.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hwsv8ms", "text": "Very small deal you'll want a private lender in CT. privatelenderlink has a list. Also Scotsmanguide commercial. Start dialing for dollars -- Stratton Equities lends on the East coast. They are a little spammy but could help especially if you are buying at a discount and perhaps need interest reserves.\n\nWatch out for brokers acting like direct money. They will blast your deal out and kill the credibility. Also, watch out for scam non-refundable fees but expect upfront deposits for 3rd parties. Keep your rate expectations in line..Probably looking at 8-11%+ on the rate but a very quick closing. Fast easy money costs..especially on vacant commercial", "replies": [{"id": "hwty2eh", "text": "Great advise. Thanks.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hwtcnqx", "text": "This is a very straightforward deal - owner occupied construction to permanent loan. I have done commercial loans for 6 years and see these all the time.\n\nThis would be a 3-6 month interest only line of credit to cover the acquisition and renovations. Depending on the bank, you might get them to lend up to 75% of the total hard cost. Once construction is complete it would then be converted into a conventional 15-30 year loan. In my experience, most commercial real estate loans have a 20 year term.\n\nFind a local bank that does construction loans. It should be pretty painless. Interest rate will be higher than your residential deals, but nothing too alarming. Talk with multiple bankers to see who you like dealing with the most.\n\nBe ready to provide 3 years of operating statements for your business, 3 years of personal tax returns, and a personal financial statement.\n\nEdit: I just read the other comments. Unless your business is a startup that isn't proven you shouldn't need to jump through any weird private/hard money lender hoops. This deal seems so straightforward to me that I'm wondering if I'm missing something.\n\nEdit 2: now I realize I did miss something - speed to close. How fast do you need to move?", "replies": [{"id": "hwtysk5", "text": "I was guessing that the cash offer was going to take the traditional bank financing deal off the table but maybe I'm wrong about it. I just got starting talking to the realtor late last week so this is all happening pretty fast. My first stop is with my current business's bank. I've been in business in CT running a s-corp for 14 years. Financial statements etc. are all in order. I'll talk to a bunch of banks tomorrow. Thanks for the advice!", "replies": [], "depth": 2}, {"id": "hwvgpft", "text": "30 days", "replies": [], "depth": 2}], "depth": 1}, {"id": "hwtgodo", "text": "SBA will finance real estate for owner occupied so may be worth exploring that possibility.", "replies": [], "depth": 1}, {"id": "hwuhmco", "text": "If this was in Texas I could get it closed in 5 days. Outside of Texas though? 2 weeks provided we start working on documentation first thing Monday Morning.", "replies": [], "depth": 1}, {"id": "hwundel", "text": "Have you looked into crowdfunding? YieldStreet does a lot of bridge loans.", "replies": [], "depth": 1}, {"id": "hwxv1sk", "text": "I do commercial bridge loans I think they are done differently", "replies": [], "depth": 1}, {"id": "hx9z0qx", "text": "PrivTe balance sheet here - I lend and have a pulse on 749 other lenders in USA", "replies": [], "depth": 1}]