Commercial Real Estate Investing From A-Z Loans: The Good, the Bad and the Ugly - Self Storage, Who is The Best Commercial Lender (Part 2)
Today we cover self storage lending, how long should you stabilize a property before refinancing, and the best kept secret is out: who is the best commercial lender in the world? We are interviewing Billy Brown, the Vice President of Business Development for Alternative Capital Solutions.
You can read this full interview here: https://montecarlorei.com/loans-the-good-the-bad-and-the-ugly-self-storage-and-what-is-the-absolute-best-commercial-lender-part-2/
Self Storage Loans
Did you know that SBA will lend on self storage? SBA has a lot of options for self storage if it's the right size. Even for ground up investments.
What would be a typical loan size?
Probably over a million. If you're going to do anything ground up on the self-storage, it's going to be over a million because the price of steel right now and the price of land. But you can get up to four years interest only. This is one where you come in and do some fun stuff where you go build it, lease it up, let it season a few years. Then once you have a couple of years tax returns, the property becomes more valuable because the NOI goes up and then you can do a cash out refinance.
For how long should we stabilize the property until we do the refinance?
I would start on the front end because sometimes I can even help you give me some tips on negotiating the financing because I love seller financing. The triplex we bought, as well as the office complex that we're buying is under land contract, also called seller financing. You can do some fun stuff with the seller financing. There are many strategies when you have seller financing, for the triplex that we bought, I negotiated a low interest rate of 4% and I negotiated 90 days before my first payment. And you'll justify by saying "I want to give you your price, but my term, and my terms are this: lower interest rate, 90 days before my first payment because I have to stabilize the property. I've to get tenants in there, I've to put a lot of money into this I don't have more money into it for somebody to back out. And I want a longer loan with a couple extensions built in. And they did it for me. You can also negotiate a limited recourse or non recourse.
How long was the loan for?
It really just depends on the terms that you’re negotiating. If you get decent terms, why would you want refinance? Most sellers want an in and out in six to twelve months. As a lender, we want to see 12 months of financials from the owner. The story also helps, and we can help with that as well.
Many sellers, especially the mom and pop deals on self-storage, or multifamily, or smaller multifamily don’t have very good financials. They mix their personal expenses in with the deal, therefore, they can’t get the prices they want. So you can come in and say “I’ll give you your price, but under my terms”. But because you don’t have proper bookkeeping, I need at least a year, 18 months, two years, to go run the property professionally so I can go get a proper loan. I usually start at two years and negotiate down to one if needed. Typically you can get a decent lending after one year.
Who is the absolute best commercial lender in the market?
The seller. Why would a commercial lender like myself, and an investor, want to tell you “Go get seller financing”? Here’s a little secret: commercial lenders are much better at refinances than they are at purchases.
Billy Brown
www.billybrown.me
www.altcapsolutions.com
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