Warehouse Loans

Owners evaluating warehouse loans will find that they have solid commercial mortgage loan options. This is a preffered building type for lenders on both owner occupied and investment transactions. One of the bigger concerns, however is environmental issues that may be present. The liability for contamination is high within the warehouse loan sector.

LTV

Loan to values are often restricted at 75% on loans for warehouses and are normally capped at 70% loan to value on cash out refinances. Higher LTV’s are available, but come at an increased price for the borrower. Lower loan to value requirements should be expected for industrial investment properties, normally reduced by 5% off the above.

Purchase transaction can go up to 90% financing for owner occupants via both SBA and Non SBA loan programs. In addition, many lenders are willing to allow secondary and or seller financing to help structure deal with a combined loan to value of 90% as the normal cap.

DSCR

Debt Service Coverage Ratio restrictions are typically set at 1:1.2 for both investors and owner occupied warehouse properties. Meaning that for every $1.20 of net income (income after taxes, insurance, repairs etc) the property/business produces, the mortgage payment will not exceed $1.00. Said in another way, after all expenses and the mortgage has been paid, the owner needs to net $.20 to qualify.

Some exceptions can be made with this rule on warehouse refinances. For example, stated income loans can be an outstanding option for owners that have low debt coverage ratios due to either overstated expenses, current high levels of vacancy, or understated income.

Tenant Evaluation

Tenant evaluation is not as important within warehouse properties as others (like single tenant NNN properties) but still important. Lenders scrutinize the time left on the current lease(s) and other relevant information. Of particular concern on industrial property refinances is the time remaining on the current lease(s). For example on multiple unit properties, lenders prefer the lease expirations to be staggered and most banks/ lenders want to see at least 3 to 5 years left on the current leases. Some traditional banks will not allow the fixed period of the loan to exceed the time left on the lease.

Property Analysis

Market value and market rent is very important and will be evaluated and compared to the subject property. Environmental condition of the property will be heavily scrutinized. Phase 1 reports will be required. Age, appearance, location, accessibility, and local market conditions, as well as other factors are considered.

Credit Worthiness

The personal credit worthiness of the borrower will be considered. 640 credit score is normally the minimum for the best finance options. Exceptions can be made on this as well with some conventional lenders considering scores as low as 600 within this category. The overall strength of the property, tenants, DSCR, and LTV can offset concerns on low credit scores. For corporations, business performance and credit rating will be evaluated.

We have some of the best warehouse loan options in the market today. For example we have a 30 year fixed program and a no cost (excluding environmental insurance) industrial refinance program for loans under $500,000.

Get pre approved now for your warehouse loan or call 248 885-8797 to discuss. Check out our commercial mortgage broker STORE.

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Commercial Finance Advisors, Inc.
(248) 885-8797 Phone
(866) 337-3141 Fax
http://www.cfa-commercial.com/
261 E Maple Rd
Suite 13
Birmingham, Michigan 48009