As you grow your Real Estate portfolio to a certain point, you’ll find that you can no longer finance your investments in the same way you’ve done in the past. You’ll find that you need to utilize commercial lending options; which can vary quite a bit from a traditional loan. In this episode, Josh DeSha, local business banker in Tallahassee, will walk us through the ins and outs of commercial lending options.
Tune in to hear:
- How commercial lending works and how it differs from traditional financing.
- The rates and general terms you can expect with a commercial option.
- How to give yourself the best chance to qualify for commercial financing.
- And more.
Episode Timeline:
2:00: Josh talks us through his career progression; how he started in Gainesville, moved to Valdosta and ended up in Tallahassee at Hancock Whitney bank.
5:10: We dig in to Josh’s wide variety of clientele and how his days vary depending on the client. In terms of Real Estate, Josh explains how he works primarily with real estate investors who are investing in real estate as a secondary interest and not necessarily as a primary job.
6:52: We talk about how Jason and Josh met and get in to the merger of Hancock and Whitney bank.
8:50: Josh explains how commercial lending works and how it differs from traditional lending options. He explains how commercial loans can be a bit more flexible when it comes to terms and traditional financing is more rigid.
10:00: We talk about the different types of commercial options and how there is really a lending option for every scenario. Josh stressed the importance of finding the right option for your specific scenario and how it’s critical to find the right Lender to take you through that process.
14:50: Josh explains the art and science of navigating investors to the right loan option. We talk about the documents investors need to bring with them when trying to acquire commercial financing.
15:55: We talk, unofficially, how it’s likely beneficial to invest from a LLC. However, from a lending perspective, it really doesn’t make much difference to the bank if you invest from a business entity or as a personal investor.
17:15: We talk about red flags that Josh considers outside of just the numbers. We talk about how the character and experience of the individual requesting a loan are important considerations.
17:30: Josh talks about his most interesting investment to date; a tug boat. 🙂
19:50: Josh explains the debt service coverage ratio and how it needs to be 1.25 or higher. You can come to this number by dividing income by debts to get the debt service coverage ratio. He explains how having more cash in the bank can also help you obtain commercial financing.
23:20: We talk about the importance of building a relationship with your commercial lending officer and how history with a bank is also important for obtaining commercial financing. We talk about the importance of having a deposit relationship and how it’s a requirement in some cases before you can obtain commercial financing.
26:38: Finally, we talk about the terms you’ll likely see with a commercial loan and how they differ from traditional financing. We touch on variable and fixed length loans; as well as the caps on variable loans.
30:20: Lastly, we talk about where Josh sees the commercial lending space going moving forward and how uncertainty will likely not have a major impact specifically on the Tallahassee market.