Today’s track: Mexico — CAKE

Quick thing about today's track. CAKE put "Mexico" on their album Prolonging the Magic, and that album came out 28 years ago today. October 6, 1998. I went in to add for today and found out it released today, The Universe!

Here's what I love about it. Right before that record, the band lost their guitarist and their bass player. Most bands fold right there. John McCrea didn't. He produced the whole thing himself, ran a rotating cast of players through the studio, found a new guitarist along the way, and the album went platinum.

"Mexico" is the slow one. Trumpet, a little southwestern swing, a guy coming to terms with something that's already over. That's kind of the mood today. A lot of owners are about to hit a date on the calendar and find out the deal they had isn't the deal they've got anymore. The ones who come out fine are the ones who quit pretending and make the next move.

And years later, CAKE built their own solar-powered studio in Sacramento, started their own record label, and put out a number one album in 2011. Do it yourself long enough and you end up owning the whole thing. Feels like a real estate lesson to me…

Here's a number that should be on every investor's radar this fall: $875 billion.

That's how much commercial and multifamily mortgage debt comes due in 2026, according to the Mortgage Bankers Association. It's about 17 percent of all the commercial real estate debt in the country. Last year it was $957 billion. A lot of that got kicked down the road with extensions, which means a lot of it is still sitting out there.

Here's why it matters in Louisville. Most commercial loans aren't 30-year mortgages. They're 5, 7, or 10 years, then the balance comes due all at once. Anything with two or more units is commercial, so this isn't just office towers downtown. It's the fourplex on Algonquin, the 8-unit in Radcliff, the strip center out on Dixie.

A five-year loan written in 2021 comes due in 2026. In 2021, a lot of those loans were written somewhere around 3.5 to 4 percent. Today that same owner is refinancing into something closer to 7.

Let me show you what that looks like with round numbers.

Say you bought a fourplex in 2021 with a $300,000 loan at 3.75 percent on a 25-year schedule with a five-year balloon. Your payment was about $1,542 a month. Five years later you still owe about $260,000. Refinance that same balance at 7 percent and your payment goes to about $1,839. That's roughly $300 more a month, or $3,600 a year, out of the same rents.

For a lot of owners that's fine. Rents went up since 2021 too. For some it's the difference between a building that pays them and a building they pay for. And some owners won't get the full amount back from the bank at all, which means they either bring cash to closing, sell, or find a different kind of financing.

So what do you do with that?

If you own: find your note. Look at the maturity date. If it's inside the next 18 months, you have more options now than you will 60 days before it's due. Refinance, sell, sell to a buyer who assumes or carries paper, or hold and pay down. Every one of those is easier with time on your side.

If you're buying: this is where motivated sellers come from. Not distress for the sake of it. Just owners who have a date on the calendar and would rather make a clean decision than a rushed one. Those are good people to be talking to right now.

Here's what I'm doing with this. I'm calling owners. Not to pitch them, but to ask a simple question: when does your loan come due, and have you thought about what you want to do? My guess is a lot of them haven't thought about it yet, and they'd rather hear it from me now than from their banker later.

Maturity Watch is a regular part of Tuesday's issue now.

Every week I'll share something about commercial loans coming due around Louisville and Southern Indiana: what rates lenders are quoting on small commercial and multifamily, what a refinance actually looks like on a real building, and what owners are choosing to do when their date comes up.

If you own a building with two or more units, or any retail, office, or industrial property, and your loan comes due in the next 18 months, reply REFI.

I'll run your numbers for free: what you'd likely qualify for on a refinance, what the building would likely sell for today, and what our buyers on OffMarket.deals would pay for it quietly. No cost, no pressure. You'll just know where you stand before the bank tells you.

This week's tool: the commercial loan sizer on thewinnerrealty.com.

Commercial lenders size a loan two ways. One is by the building's income, using what's called DSCR (debt service coverage ratio): the net income divided by the yearly loan payments. The other is by value, using LTV (loan-to-value). You get whichever number is lower.

Back to that fourplex. Say it brings in $34,000 a year in net operating income after taxes, insurance, and upkeep, and it's worth $450,000 today. At 7 percent on a 25-year schedule, with a lender who wants a 1.25 DSCR and lends up to 75 percent of value, the income test gets you about $320,700 and the value test gets you $337,500. The income test wins, so the loan is about $320,700.

They owe about $260,000. So that owner doesn't just refinance. They can pull out roughly $60,000 before closing costs. Same building, very different conversation than the one they were dreading.

Plug in your own building. It takes about 30 seconds. The page also has a triple net lease cost estimator, a lease vs. buy calculator, and a 1031 exchange deadline calculator.

📊 Yesterday's poll: Which of these would've blown 10-year-old you's mind the most? A car with no steering wheel ran away with it at 52%. Package on the porch by 4 a.m. got 24%, a ticket to space 19%, internet on a mountaintop 5%, and the AC got zero. Zero. Kim said cruise control alone blew her mind at 10, so a car with no steering wheel would've had her thinking she fell into a Jetsons cartoon. Same, Kim.

Today's poll:

This had a TON of reach outs yesterday, so I thought I’d post it again today!

Colleen Reilly is Winner Realty's COO (Chief Operating Officer), my best friend, and the best transaction coordinator in the business. A transaction coordinator, or TC, is the person who takes a deal from signed contract to closing. Every deadline, every signature, every call to title, the lender and the attorney.

She's handled 420+ transactions over eight years. Novations. Short sales. Land contracts. Lease options. Assignments. Assignments. Assignments. Assignments. She has literally seen everything.

And there's no other TC in this business with that kind of transaction volume who's this empowered with AI, tools and resources. Best in the business. She's so efficient people sometimes ask me if she's a real person. She is. I promise.

Her company is Closings with Colleen. If you're a wholesaler, be sure to schedule time to talk with Colleen. Reply "COLLEEN" and I'll connect you two myself.

Spoke with Harry Borders from Borders & Borders, he is down to clown on an educational webinar about assumptions and seller financing. We’ll get a date locked down and let you know!

Been talking with Tom Ferry as well. He invited me on his podcast to discuss the evolution of the industry. He want to “Blow some minds.” Hope it comes to fruition! Six degrees of seperation….😉

Warmly,
Rob Bergeron

Owner–Realtor at Award-Winning Winner Realty
Winner Realty: (502) 305-8915
Winner Realty | OffMarket.deals | Property Partner Data Company

Schedule time to discuss your goals, bottlenecks, or whatever’s on your mind — book me here.

The Morning Bergeron daily track playlist

PS: The lists, like always. Here's every multifamily building for sale in Jefferson County on the MLS right now — 153 of them, from duplexes up to a 48-unit. Remember, anything with two or more units is commercial. That's the whole point of today.

And here's the same search on KCREA — the Kentucky Commercial Real Estate Alliance, the commercial listing service run by Greater Louisville REALTORS. A lot of commercial brokers put buildings there that never touch the regular MLS. 130-plus multifamily for sale around Louisville.

Winner Realty’s great offerings! Our Offmarket.deals as well!

PSS: Bonus list. 55 homes for sale right now with an ADU. ADU stands for accessory dwelling unit — a second, smaller place to live on the same lot. Carriage house, garage apartment, guest house, or a basement apartment with its own kitchen. Live in one, rent the other. Or move your Mom in. Either way, that's a house that helps pay for itself.

PSSS: Now the part I actually want you to do something with. Here's the multifamily market in Jefferson County this morning:

Put that next to the $875 billion wall. These are owners with a date on the calendar and a building that isn't moving. That's not a reason to feel bad for them. It's a reason to talk to them.

So here's the play. Send LOIs. An LOI is a letter of intent — a one-page, non-binding offer that says here's what I'd pay and how I'd pay it. Two offers on every building. One is cash or hard money — a hard money loan is a short-term loan from a private lender that funds fast based on the property, not your paycheck — so it's a fast, clean close at a lower number. The other is seller financing — closer to their price, but the seller carries the loan and you pay them every month instead of a bank.

Make them say no. A no costs you nothing. And every no is an owner who knows your name when that balloon comes due. Make 16 offers to get one. See if you can make one of them work.

If you want help putting the offers together, say the word.

PSSSS: If you need commercial money, I've got a great plug. A DSCR loan (debt service coverage ratio — the lender qualifies the building's rent, not your W-2), a refinance before your balloon hits, a portfolio loan (one loan that covers several properties), whatever it is. This group is super well connected and resourceful. If you've got a trickier situation, they'll flat out tell you what your best option is. No sugarcoating. And it's going to be the best option. But if there's a way and a will, we'll make it happen. Happy to make the intro — just hit me up.

PSSSSS: This ain’t the birds and the bees.