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Let us begin with the purchase of an apartment building. The same principals would apply to Mixed use properties, self storage facilities, mobile home parks, office buildings and other income properties.
Remember the term "cap rate." It stands for capitalization rate. The meaning is really quite simple. We can compare it with the term "P/E ratio (price/earnings)" in the stock market. A P/E of 40 means that the stock is selling at 40 times current earnings. It also means that at the current earnings rate; it will take an investor 40 years to get his or her money back.
The average P/E of the Standard and Poor stock index over the years is about 15 ..... not 40. Just like paying too much for property can mean disaster, paying too much for a stock with a high P/E usually means you get slaughtered. The dot.com market catastrophe was caused by greedy investors paying too much while caught in a frenzy of optimism. Each buyer was working on the "greater fool" theory which means they were sure that a greater fool would come along and pay too much for their stock when they needed to sell.
But we’re not here to talk about the stock market...... we’re interested in income producing property as our investment. However the same rules apply. Just substitute the "cap rate" for the "P/E ratio." However the cap rate used to value property works just the opposite of the P/E ratio. A cap rate that is too low means that you may be paying too much for the property. The cap rates listed below are generally used by lenders when making loan decisions. You may allow yourself some leeway if you have a very strong reason to believe the property is worth more.
You’ve heard the term loan-to-value (LTV). You may not know what it means. It simply means that the commercial property lender will loan a percentage of the best estimate (fair) value of the property to you so that you can buy your apartment building or other income property. A LTV of 80% means that you will have to put up 20% as a down payment and the lender will finance 80%. The catch is the "V" in LTV. The "V" stands for VALUE.
- A "9 cap rate" (.09) is a number considered fair and workable by many lenders when loaning on apartment buildings (multi family properties). Occasionally you may be able to go as low as an 8.5 cap rate on apartments, but this should be the exception not the norm.
- A "10 cap rate" (.10) is a number considered fair and workable by many lenders when appraising most other types of income property.
The lender, using a professional appraisal as a guide will place a value on the property. It doesn’t matter what you think the property is worth, or what the seller thinks it is worth; what matters is what the LENDER feels it is worth.
PLEASE CONTACT US TODAY....
If you are interested in buying or refinancing a commercial investment property now or in the near future. Take advantage of our over 40 years of experience securing financing for nationally located multi-family properties, mobile home parks, office buildings, storage facilities, motels and many other types of properties. We do not engage in the financing of residential real estate. Please notice our contact information and minimum loan amounts shown below.
How to Contact Us:
Or phone or text us:
Send us an E-mail with some details of your financing request. It is important to send your: Full name, PHONE NUMBER and a paragraph or two describing your financing needs. Please DO NOT forget to include your PHONE NUMBER.
Call us anytime 24/7. We are available for one-on-one discussion up to 11 PM Eastern Time and on weekends.
BARCLAY ASSOCIATES - Cherry Hill NJ
MINIMUM LOAN AMOUNTS
Copyright © 1997-2020 JS Inc./Barclay Associates-All Rights Reserved
- INVESTMENT PROPERTIES - COMMERCIAL MORTGAGE LOANS-
Multifamily - $ 400,000 minimum loan amount. ($500,000 minimum if referred by broker.) Multifamily buildings must be 10 units or more. NOTE Possibly can do Multifamily loan amounts as low as 250,000 ($300,000 if referred by broker.) but must have 25% down payment.
- OTHER INVESTMENT PROPERTIES
Office building loans, self storage units, mobile home park financing, strip centers, warehouses and other commercial real estate property loans - $300,000 minimum loan amount ($375,000 minimum if referred by broker).
- RAW LAND LOANS OR LAND DEVELOPMENT LOANS $1,000,000 minimum loan amount.
- SBA LOANS-$500,000 minimum loan amount. ($600,000 minimum if referred by broker).
- OTHER SMALL BUSINESS LOANS (NON SBA)- $500,000 minimum loan amount ($600,000 minimum if referred by broker).
- FACTORING AND ASSET BASED FINANCING These are business loans using accounts receivable, inventory, equipment & real estate as collateral- $1,000,000 minimum loan amount.
- OTHER TYPES OF FINANCING NOT INCLUDED ABOVE - contact us for minimum loan amounts.
BROKERS and other intermediaries- WE WELCOME BROKERS. It is EXTREMELY IMPORTANT that you [CLICK HERE] to obtain full information about our referral fee program and our referral fee rates to brokers.
WHAT WE DO NOT DO:
- We DO NOT finance residential properties-only commercial.
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Copyright 1997-2021 JS Inc./Barclay Associates-All Rights Reserved