I want to buy $3-4MM worth of real estate debt. I only have $500k-$1MM. Who should I talk to that will lend the difference backed by my capital, if that makes sense. spec finance outfit? commercial bank? Any idea what **terms **I could expect?
Plan is the following: 1) Borrow $2.75MM, + my $750k gets me to $3.5MM, 2) Invest $3.5MM into a private real estate company which has $3.5MM of mortgage debt. They will pay off their current mortgage (7-8% debt rate), and in return owe a secured note to me, yielding TBD. Might do convertible debt, or something different. 3) ???? 4) Profit.
I'd appreciate anyone's insight if you're familiar with this type of set up.
Some commercial banks will do that, but I suspect it would be in the 50% to 60% (maybe 65) LTC/LTV range, so you'd need more equity to finance $3.5 MM. To find those banks, you will probably need to approach many and I would go local to the RE or local to where you live.
There are non-bank lenders that may do it as well, but I suspect you're looking at that 7-8% interest (something fairly high).
Edit: Is this commercial RE debt or residential debt you are looking to buy?
appreciate the response. thanks!
edit: LTC = Loan to capital?
In the case of LTV, there is up to $10MM in real estate that could be allocated as collateral on this note.
Let's say that the $3.5MM note has $7MM on real estate pledged as collateral...if this was the case would a lender accept the deal (low LTC, but high LTV).
2nd edit: this is multi-family, houses and smaller apartment buildings.
Basically the operating entity isn't able to change their mortgage and theyre stuck paying 7-8%. hence thinking of paying back the mortgage and setting up a new debt via the secured note instead.
https://www.google.com/search?client=opera&q=LTC+loan+to
You could use a warehouse line of credit to fund the $3mm portion of the loan. Then you bifurcate the note, sell off the A note on the secondary market to pay off the warehouse loan and keep the higher yielding B note for yourself. You'll have to pay a broker fee to sell the A note and the legal fees would be high as well. probably not worth it with this small of a loan
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