Special Use Commercial Real Estate such as Gas Stations, Hotels, Restaurants, Bars, etc.

Outside of traditional investment real estate, there are also special-use properties that need financing. These properties often take additional analysis and the number of lenders available is even thinner then it is for traditional investment real estate. When it comes to special-use properties, it is absolutely essential to get to the right institution that will even consider that type of request and the right lender within that institution that understands the industry. Below are the types of lenders we typically work with when it comes to Special-Use Properties.

a) Traditional Banks – If you thought the number of lenders working on investment real estate was low, when it comes to special-use properties (those non-owner occupied at least) it is even lower. However, we have a large number of community banks, regional banks, and national banks that will consider providing special-use real estate financing under the right situations.  Advance rates these days vary, but are typically no higher than 70% and in some cases start even lower than that. The advance rate will largely depend on the condition of the property and business operation in place. Cash-out refinances are hard to achieve, and when they do happen it is typically with loan to values at or in some cases substantially lower than 50%. Also, the cash-out often has to have a good purpose, either for improving the property, specifically investing into something else, etc. Loan terms are typically three to five years. Amortizations are usually no greater than twenty years, and in some cases do not exceed fifteen years. Interest rates vary quite a bit depending on the quality of the transaction, but interest rates range from the 5% range for low risk transactions to as high as 7% or even sometimes the 8% range for higher risk transactions. We have the right solutions for our clients and typically know relatively quickly after taking on a transaction whether it can be done at a traditional bank.

b) Private Lenders – We have many private lenders willing to provide financing for special-use properties. These lenders are conservative and are looking for performing properties. Interest rates are quite a bit higher than traditional bank rates, currently between 8% and 16%. Also, advance rates are typically conservative and will not exceed 65% of the lesser of value or cost. In some cases cash-out refinances are allowed, but typically when that occurs the loan to value is quite a bit below 50% and the Borrower has to have a good use for the money. Terms vary widely depending on the program from one-year to five-years, and some loans are interest only while others will be amortizing sometimes over as much as thirty-years.

c) Hard Money Lenders – We have hard money lenders looking to put high risk capital in place on transitional special-use properties. Often times these are storied properties where the Borrower needs capital for a short-period of time to allow for a stabilization of the property or for some work to be completed. In addition, these lenders are often willing to fund note purchases as well as straight mortgage debt. These lenders won’t typically fund more than 65% of total cost, without regard to existing or end value, and are typically providing that funding on a short-term one to two year basis. However, additional funding can often times be available if there is outside collateral to pledge. In almost all cases the loans are interest only with interest rates between 12% and 18%, and high loan fees between 2% and 6%. All of the lenders we work with underwrite each property looking at the end game and the ability of the Borrower to refinance that property into more traditional financing upon maturity of the Hard Money loan. We do not work with lenders that are underwriting these loans on the front-end with hopes of taking them back. We typically will not recommend a loan for Hard Money unless we are confident a plan is in place where we could even get the replacement financing done once the property is stabilized or repositioned.