Commerical Loan

[Gustan]

Cathy, @MortgageSensei Nelson Thompson will respond to this case scenario. From what I see, here are the questions that need to be addressed:

1. The acquistion cost is $3.5 million. What is the cost of the renovation.

2. What is teh score of work? What is your investor trying to do? Is the investor doing a conversion of a commercial building to a residential building? Is the investor doing it 100% residential or mixed use where there is commercial and residential? If the project is going to be mixed use, what percent is commercial and what percent is residential?

3. What is the investor’s or investors experience with doing such a project or experience overall in commercial real estate and renovation project experience. If the borrower had such experience, he or they will know what lenders will need.

4. What is the area like? Example A, B, C, or D.

4. Nelson Thompson is going to need the borrower or borrowers personal financial statements, profit and loss, scope of work, schedule of real estate, three years of personal and business tax returns, and summary sheet.

Nelson will reach out to you.

[Bruce]

Converting a warehouse into an apartment building for a non-profit organization can be an ambitious project, but obtaining financing for it may be feasible with the right approach. Here are some steps to consider:

1. Business Plan Development: Create a comprehensive business plan outlining the project’s scope, timeline, costs, revenue projections, and the social impact it will have as a non-profit initiative. This plan will be crucial for demonstrating to potential lenders the viability and sustainability of the project.

2. Identify Lenders: Look for lenders experienced in financing similar projects or those with a focus on supporting non-profit initiatives. Local banks, community development financial institutions (CDFIs), and government-backed loan programs might be good places to start.

3. Grants and Subsidies: Research grants, subsidies, or tax incentives available for converting warehouses into affordable housing or for non-profit organizations. These can significantly reduce the financial burden and make the project more attractive to lenders.

4. Collateral and Guarantees: Non-profits might not have traditional assets to offer as collateral. In such cases, lenders might consider alternative forms of security such as future revenue streams, project assets, or personal guarantees from board members or other stakeholders.

5. Creditworthiness: Even though it’s a non-profit venture, lenders will still evaluate the creditworthiness of the organization and its ability to repay the loan. Having a strong financial track record, stable revenue streams from other sources (like grants or donations), and a good reputation within the community can enhance the organization’s credibility.

6. Loan Structure: Depending on the project’s specifics and the lender’s preferences, you may explore different loan structures such as fixed-rate or variable-rate loans, construction loans, bridge financing, or even mezzanine financing if needed.

7. Regulatory Compliance: Ensure compliance with all zoning regulations, building codes, and other legal requirements for converting the warehouse into residential units. Lenders will want assurance that the project is legally sound and won’t face delays or setbacks due to regulatory issues.

8. Professional Assistance: Consider engaging professionals like architects, engineers, contractors, and legal advisors experienced in similar conversions and non-profit projects. Their expertise can streamline the process and provide additional credibility to your loan application.

9. Community Support: Highlight community support and involvement in the project. Lenders often appreciate initiatives that have strong backing from local residents, municipalities, and other stakeholders.

10. Negotiation and Flexibility: Be prepared to negotiate terms with potential lenders and remain flexible throughout the process. Non-profit ventures may have unique challenges and constraints, so finding a lender willing to accommodate these factors is crucial.

Remember that securing financing for such a project may take time and persistence. Be prepared to provide thorough documentation, address any concerns raised by lenders, and demonstrate the social and economic benefits of the conversion project.

[Bruce]

Also, there are zoning issues you need to deal with and permits as well as you need to get community approval which is a positive thing for the neighborhood.