What Interest Rate Can I Expect?

[MKyz]

My husband and I are looking into purchasing some land that has 6 mobile homes renting spaces for $175/month and currently there is one open space. The purchase price is $120K and I don't anticipate taxes and insurance to be more that $200/month.

What type of interest rate can we expect on this type of loan and how much would we typically need to put down?

All thought provoking questions are welcome. Just wanted to throw this out there to see what type of responses I get from all you seasoned investors. Thank you.

 

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[Russ H]

Mkyz-

Do you have a loan broker?

Most commercial purchases need enough down so they debt service from the income generated (providing for maintainance costs, insurance, taxes, etc).

You may even qualify for an SBA loan (we have)-- so you should check into this (again, a mortgage broker can be invaluable w/this).

Owner carries are also *very* popular for these kinds of deals, since the banks often aren't too excited about them (again, it depends on your area, and lenders).

-Russ H.

 

[andviv]

I tried in the past to use an SBA loan to acquire RE investment property but they told me I can't do it as the property wouldn't be an expansion of my small business. Maybe having a business whose purpose is to rent the spaces would be seen differently (maybe by being based on the property), but I guess it depends how you structure it. I don't want to be a naysayer, I just want to let you know what my experience was with SBA loans... but preferably listen to somebody that actually made it happen instead of me who couldn't.

Now, about this deal, purchase price seems a little bit high, in my opinion. After taxes/insurance and a vacancy of 10% (which sounds kind of low to me for this type of property) you only have $922 a month in income. I think you may be a little short in cashflow here after paying the loan.

Is there a realistic potential of increasing rents in the near future?

I tend to agree with Russ, a great alternative is owner financing, do you know if that is possible in this deal? (have you ask them yet for owner financing?)

 

[MJ DeMarco]

No one has mentioned your credit score. If its poor, you can expect a higher rate or not even to qualify as credit has significantly tightened as the investors that buy the loans are now skittish.

 

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[MrDoctor]

No one has mentioned your credit score. If its poor, you can expect a higher rate or not even to qualify as credit has significantly tightened as the investors that buy the loans are now skittish.

Very true. Even if you have a good credit score, I can almost guarantee you that the company you pull the loan out with will raise your rate due to "economic factors" within the next couple of years. Also, be careful with the company you choose. The more financial trouble that company is in, the more likely they are to full a "fast one" on you.

I suggest you wait on the loan and continue to save money. Depending on the area you are planning to buy it, it can either be a good or bad time to get into lot leasing.

 

[tbsells]

This is going to be a tough loan to get. Usually a small bank in the local area where the property is located is your best bet. Look for the one that advertises "serving _____ for 80 years." Small banks can often be more flexible in their lending. The problem with this property is that its unique. Its going to be hard to appraise. It will be nearly impossible to package in with other loans and sell. Big banks and mortgage brokers need to sell their loans to raise capital to make more loans. Small banks are usually loaning you the money from their depositers. They may be paying your Grandma 1.05% for her savings account and loaning her money to you at 8%. Thats how they pay for those big brick buildings. The small banks can be great for investors because of added flexibility but they have their drawbacks. I would expect to put at least 20% down on this purchase. Interest rate would probably be at the normal commercial rate for the bank.

The best way to do this deal is with owner financing. The seller is going to have a hard time selling it because its going to be very difficult to finance for you or anyone else. That should provide an incentive for him to work with you.

 

[MrDoctor]

This is going to be a tough loan to get. Usually a small bank in the local area where the property is located is your best bet. Look for the one that advertises "serving _____ for 80 years." Small banks can often be more flexible in their lending. The problem with this property is that its unique. Its going to be hard to appraise. It will be nearly impossible to package in with other loans and sell. Big banks and mortgage brokers need to sell their loans to raise capital to make more loans. Small banks are usually loaning you the money from their depositers. They may be paying your Grandma 1.05% for her savings account and loaning her money to you at 8%. Thats how they pay for those big brick buildings. The small banks can be great for investors because of added flexibility but they have their drawbacks. I would expect to put at least 20% down on this purchase. Interest rate would probably be at the normal commercial rate for the bank.

The best way to do this deal is with owner financing. The seller is going to have a hard time selling it because its going to be very difficult to finance for you or anyone else. That should provide an incentive for him to work with you.

:iamwithstupid:

Try local credit unions and regional banks.

 

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[AroundTheWorld]

right now things in the lending world are in a very rocky situation.... programs are changing and disappearing by the day..... literally.

We are helping a family member obtain a cash out loan and programs that we qualified for last week have dissapeared --- we are finding ourselves looking for plans b, c and d.

It is crazy.

If this person really wants to sell..... try for an owner carryback. If you can - go face to face with the seller and find out what their goals and desires are. What do they plan to do after the property is sold? Then, sit on that info for a while. Think outside the box. Is there any way you can make the deal happen for them in a way that they will get what the want/need without traditional financing?

 

[MrDoctor]

right now things in the lending world are in a very rocky situation.... programs are changing and disappearing by the day..... literally.

We are helping a family member obtain a cash out loan and programs that we qualified for last week have dissapeared --- we are finding ourselves looking for plans b, c and d.

It is crazy.

If this person really wants to sell..... try for an owner carryback. If you can - go face to face with the seller and find out what their goals and desires are. What do they plan to do after the property is sold? Then, sit on that info for a while. Think outside the box. Is there any way you can make the deal happen for them in a way that they will get what the want/need without traditional financing?

Check this out. I increase my credit line every 6 months. I was increased to, hypothetically 25k on the spot. I get an email later saying that I have been increased to 20K from 15k. , these credit companies are REALLY being cautious, and it suprised me because I bring them lots of business (and have an excellent credit score.)

Check this out: Sadly, I have a Cap One account. It was one of my first accounts, so I did not want to close it. My credit line went from, hypothetically, 5K to 2.5K. I called Cap One and they told me it was because Cap One made a "mistake" in issuing me my original credit line .