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Feedback on this financing offer for 11 oceanfront units - how much can I push back???

TangoWhiskey

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We have a great deal under contract that for the 1st phase is a repositioning of 11 C class units to A- class. The bank asked for an appraisal which came back confirming we're getting assets below market. We gave that to the bank two days ago. Close is Dec 4th. They also know that we have a P&S for the neighbouring property for the 2nd phase of an overall 20 unit development.



We just got the committment letter and the terms are now not as favourable as what the banker gave us verbally. The interest rate on the interest only construction phase is now 1.25 % higher at 5.25% whereas he promised 4 % verbally, there's a 4K application fee, and a 500 $/yr "annual review" fee.



How much can I push back? I kind of expect the bank is going to try and claw out whatever they can since I would pay a commercial mortgage broker 1 % on close, but this seems a bit beyond that.



Are these terms reasonable? Or is it the bank looking at the closing date and saying these guys don't have much choice?



Thanks, all input much appreciated esp from Thomas and any mortgage guys.



Tris
 
A 1 to 3% application fee is common for mortgage origination; higher % for smaller loans below $1M, less on larger loans. Prime plus 1.5% to 2.5% is also very normal, ie 4.5 to 5.5% today. Again higher % for smaller or riskier projects or higher loan-to-cost ratios. What loan-to-price ratio are we talking here ? 75% ? What type of Oceanside ? Risky remote market or urban ?




Take this fairly cheap money and fix the units and make a ton of dough. Don't major in minors. The fees you are paying are a rounding error in the potential profits you will make.




Having said that you should always always talk to a mortgage broker, not a bank directly. Brokers usually know the market very well and get you the best price, better terms and higher loan amounts given a certain project.
 
The location is actually about as good as you could hope to get for semi-urban oceanfront, a very rare beast to find at reasonable price. The market is basically a historic fishing village that is getting swallowed up in urban sprawl, and the property is a direct 8 km commute to downtown Dartmouth and the bridge or ferry to downtown Halifax. Dartmouth is undergoing something of a renaissance with several new massive condo developments aimed at retired Boomers who want the nicer view of Halifax rather than the reverse view of Dartmouth from more expensive Halifax. LTV is 75 %.



Point taken about working with a mortgage broker, I've been working with Montrose on another file, for this stage of investing I've been trying to send multiple deals to multiple places to find the guy who does the best job and then build the long term relationship.



Herzliken dank.



BTW as someone who learned how to speak another language as an adult (very hard work) I have always thought your English is extremely good. Better than many native speakers.
 
Herzlichen Dank, actually. I've been here half my life, hence the impeccable English, both spoken and written .. Ho ho ho !
 
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