102% LTC Blunder-Continues

Last week, I talked with an investor that was seeking financing for a $5.2 Million Dollar apartment building.

After talking with him for 20 minutes, I discovered the following:

1. This investor had placed $10,000 dollar down on this property and was agreed to  an additional $20,000 down in 14 days.
2. The property was priced at an 11% Cap Rate
3. The property was 90% occupied

This looked like a very simple deal right?  Yes and no!
Here’s what happened:

I did a three way call and was able to get a verbal quote from a national lender
at 102% LTC. Loan To Cost. This tool about 5 minutes to do.

The investor would need to put 1% down and he would be able to get 1.5% back at the closing 100%  “tax free”.
This investor needed to put$50,ooo in this deal and he would get $75,000.00 back at closing plus all impounds and the property.

The Problem And The Pattern

The investor had no clue as to how to rise $50k even thouugh he would be getting back $75k tax free and the property.

This is the pattern I see so often.

No Money And No Knowledge = No Results!

Has this happened to you ?

Unfortunately, this investor will lose his $10,000 because of his lack of money and knowledge.
Typically, you can over financial short comings with knowledge. But when there is neither knowledge or
money available.. There really isn’t much you can do.

How do you overcome these problems?

I always begin with the property. If the property can bring 102% financing to the table, I’m sure
I can squeeze an additional 1% from the property also.

Option 1: I would begin by backing the LTC down from 102% to 100% and have the additional  1 % rolled into the loan.
Option 2: I would run an amortization schedule on the property and offer a percentage of the write off  without any cash flow
to a national mutual .
Option 3: I would conside putting together a syndication.
Option 4: I would consider wholesaling the property to a REIT.

This is one of the numerous problems that we provide solutions for at our live workshops.
Visit www.commercialfinancingworkshops.com for our next event.

Tell me what do you think. How would you solve this problem?
If I gave you a 102% LTC Plus lender could you raise the $50K?

I’m listening

Durante