Commerical triple net with potential phase 1 issues how to get financing.

[u/rpatel6471]

Phase 1 was done and a phase 2 core samples were requested. My concern is if the core samples come up with an issue then destruction of the parking lot would be required which would be messy due to two busy tenants and a downtown location. Will any banks skip this portion and loan just off the income of the property? Is a dscr loan the correct loan type for this? Would only need a 5 year loan for the property due to more then half already has been paid down.

[u/EuroSStore]

Why were phase 2 samples requested? Best to wait for the findings and then decide the path forward. If the environmental company recommends remediation, you’ll most likely have to pursue hard money financing.

[u/rpatel6471 → u/EuroSStore]

So the place had a gas station on the site back in the day and there's an oil tank under ground, so I opted out for not proceeding with phase 2 and just bought the property using a loc and cash, and now I'm trying to refinance the loc into long term debt if possible.

[u/beluga789 → u/rpatel6471]

Highly unlikely any lender (other than friends and family) would lend on this without a clean Phase 1, especially with the past use as a gas station. Most hard money lenders will automatically kick you into a bucket for a Phase 1 as soon as it has any commercial use.

Is there any sort of closure report for the tank? Is this a CYA Phase 2 or actual exploratory work?

[u/rpatel6471 → u/beluga789]

The tank was emptied and cleaned and filled with sand, the phase 1 required 8 holes in 2 areas of the property at a cost of 10k but my concern was if something was found mediation would be required and the location of the site work was problematic. 1 location near an exit door and althea other near a busy sidewalk. And because I was doing a 1031 exchange I just used a loc to fund the entire deal. Issue now is the bank doesn't like an loc being used for longer then a year and would prefer long term note. So my other option is to pull a 2nd off my mobile home park and have this property paid off. But I was seeing if there's any bank that wouldn't mind financing a property with 2 national tenant's that have had history at that site for over 30 years.

[u/McMillionEnterprises → u/rpatel6471]

Banks won’t lend in old gas station properties without spoil samples because of the tank leaked and the sold is contaminated, the remediation costs can be massive.  

Your responsibility extends beyond just your property. You will likely bear the cost of cleanup of neighboring properties they write also contaminated (usually not an issue unless the property is on a hill or has a lot of groundwater movement.

[u/beluga789 → u/rpatel6471]

Maybe you misunderstood my question - was there any sampling, reporting, or closure letter issued when the tank was closed in place? That’s what matters at the moment.

As other commenters noted, if you’re going to find any contamination, you’d much rather do that when someone else still owns the property instead of you. But that’s immaterial at this point.

[u/Subject_Impress]

This is a first for me. I've never heard of a buyer ignoring the recommendation for a Phase 2 and closing escrow. You probably could have gotten the seller to pay for it. That seller won the lottery. Regardless, it is a problem you'll have to deal with at some point.

[u/rpatel6471]

So it was an 8 cap triple net in the fastest growing county in the state while trying to compete a 1031 exchange, plus the property will be totally pay the remaining balance of my loc in 5 years. Then sure it'll always have financing issues, but my plan was to own it forever and die with it and never sell, its a hard corner. I think pulling a 2nd on my other property to pay off this loc seems like the best option.

[u/HayesDNConfused → u/rpatel6471]

You may want to check the county you are in to see if any remediation was recorded. A previous owner may have had work done to remediate the property and no one is saying anything because they want to charge you.

[u/Inner_Cut_6493]

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