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How to Qualify for Commercial Loans with Scott Williams, Episode 109

July 30, 2019

 

 

The largest source of capital for real estate comes from the debt lender, but investors tend to spend little time speaking with lenders to understand their requirements. On this episode, we speak with Scott Williams of Aline Capital on how to qualify for commercial loans. He shares great tips for syndicators and shares why the interest rate is not the most important metric you should evaluate.

 

 

Partner:  Join Our Exclusive List and Get a Free Sample Apartment Deal Package

 

 

Key Market Insights

  • Provides both equity and debt financing

  • Equity: returns fluctuate with property; Debt returns are fixed

  • Institutional equity is deal based but operator must have experience

  • Grew up in commercial real estate, father was a commercial appraiser

  • Received a real estate degree out of Clemson

  • Worked as outsourced underwriter for Fannie Mae, Freddie Mac and CMBS

  • Common mistake operators make is seeking the lowest interest rate

  • The #1 thing to make or break returns on a deal are pre-payment fees

  • Yield maintenance: typically on CMBS

  • Step-down, open pre-pays

  • Operators seeking maximum IO (interest only payments)

  • Maximum IO comes with longer loan terms, even on a step down, you will have a higher pre-payment in the early years

  • Markets shift, watch prepayment for flexibility

  • Assumable loans help, but you want to ask if a second loan is acceptable

  • Fannie Mae loans are assumable, supplemental loans are permitted

  • Get comfortable with the stress metrics

  • What has to happen for this deal to fail? How likely is this scenario?

  • Pay attention to real estate taxes – in South Carolina, it is a point of sale state where property is re-assessed at the point of sale

  • You do not need to disclose to the lender that you are syndicating the deal

  • Lenders want to know that borrowers have skin in the game

  • To get a non-recourse loan: net worth equal to the loan, liquidity and post close liquidity (9 -12 months of debt service to 10% of loan proceeds)

  • Having a partner with liquidity is the #1 reason syndicators add partners

 

Partner: Check out the Passive Income through Multifamily Real Estate podcast with Kyle and Lalita Mitchell

 

 

Bull’s Eye Tips:

Winning the Best Commercial Loan: Work with someone before you find the property
 

Tracking Market Changes: Constantly evaluating interest rates and programs


Daily Habit: Only have 3 priorities per day


 

Resources:


Best Business Books:

Traction by Gino Wickman

 

 

Digital Resources

Podcasts

 

Tweet This:

“Common mistake operators make is seeking the lowest interest rate”
 

“The #1 thing to make or break returns on a deal are pre-payment fees”


“You do not need to disclose to the lender that you are syndicating the deal”

 

 

Places to Grab a Bite:

The Anchorage – Greenville

 

Connect with Scott:

Website: Alinecapital.com

Phone: 864-729-3990

 

Leave us a review and rating on Apple Podcast or Stitcher. Be sure to check out more info at TargetMarketInsights.com.

 

 

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