$1.25 million loan - What it takes

Would like to get into commercial real estate investing. My family is in property management so I’m quite familiar with the management side, but not necessarily the investor/owner side.

What would it take to get a mortgage for $1.25million for a 23 unit apartment building (14 units are 2 bedrooms, remaining 1 bedrooms)? They claim to have a Scheduled Gross Income of $188,000 with a NOI of $104,000.

For loans of this size, how important is personal credit? I only have about $40,000 in cash and would imagine I would need 20% - 30%.

Can anyone shed some light on how I might be able to one day pick up a deal like this.

Thanks in advance.

You may want to find a partner to help cover any money down. Maybe you could put together a syndication with your family. Your personal credit should not matter at all and I would stay away from lenders who require it. The main factor is going to be the Debt Service Coverage Ratio (DSCR) of the property. There seems to be a pattern with loans up around $5 million at which point the owners aren’t a factor at all. You may need to shop around for a loan since your property is under that.

-Hope this helps

you will need at least 20% down (maybe as much as 30%) and/or owner carry to that effect. Then usually the lender on the 1st wants to see monthly gross income at least at 110% of debt service (some will want as high as 125%).

that’s my experience with those type loans

i’d recommend putting together an LLC and raising money from friends and family.

You need to have experience investing or partner with someone who does. Credit is very important because lenders what to see how they will get there money back and if the borrower is credit worthy. Your are looking at around 20%-30% depending on your downpayment and credit. I hope this helps you.

90%ltv is possible with a mezz. piece behind the 1st…

90% 1 loan is available with a 680 FICO. Rates around 8.5% on a 5 YR ARM.

I take that back, over 20units and with a 700fico there’s a 100% program.


How do I qualify for a commercial loan?

The commercial real estate is the predominant factoring in the qualification process for commercial mortgages. However, with that said, you the guarantor can either positively or negatively impact the qualification process for your commercial loan.

The commercial real estate is the collateral for the commercial loan. Therefore, we must first look at the underlying asset as the source of repayment for the commercial loan. For example, you have a 16 unit apartment building in which you are seeking to refinance. We will first look to the apartment building as a source of repayment for the loan. We will look at the properties rent roll, Profit & Loss Statements and determine the annual income and expenses for the property and simply determine if the annual cash flow can service the debt.

10% down or 10% seller carryback on the right property. 90% is doable.

Just to complicate matters, here is one more scenario:

        80% first mortgage from us (rates in the 7’s)

        5% second mortgage from us – our MEZZ program 

        10% seller second –secured by another property that the borrower owns.

        5% from the borrower!

What rate would this be at?

100% on the subject property is not going to happen. There is a company called Crusader Commercial which plays on peoples ignorance of this fact to market a 100% 80/20 program.

I don’t know about you but I find a company, with only two people working in their office (family business) last time I checked, offering the only 100% commercial loan program on apartments in the United States…who asks for an upfront fee!..kind of suspect.

Patrick (4EEM) is right on this… Anyone who can do 100% financing without cross collateralizing or having some use of pledge assets… is straight up wrong.

Commercial is different than Residential… Back in the old days, you would have to put 20-30% down… We call this “vested Interest”. A share if you will, in the RISK between you and the bank… Now, due to flexibility in many investors/vendors guidelines and conditions, we have been able to decrease the buyer/borrowers risk to a 5-10% down margin. Still, there are many factors that coincide with Commercial Lending and by all means let me ask you why would you put your investment in the hands of a 25 yr old loan officer? Banking experience is a must in this industry. A finance Degree is a must… At 25 years old, you’re not going to have both… Unless that person can show you a profit and experience to match, I would stay away from the younger loan officers who jumped in this market after the REFI Boom in order to make a buck. Before the REFI Boom of 9/11, you could not just walk into this business… You had to have the proper FINANCIAL RESUME… Choose your financial advisor wisely, choose your attorney wisely, and why not choose your loan officer wisely… Otherwise, you’ll pay for it in the end.

Right! I don’t see how the State of Florida has not shut down Crusader by now.

I don’t know about discriminating based on age, but I must say that the types who jumped into the business for a quick buck are the bane of many professional loan officers existence. They have given everyone a bad name. A few years of “easy money” has created an image of brokers that will take many more years to shake.

Cases in point:
-Newest member of the “G-Unit” (gangster rap group) lists being a former broker as part of his “street cred”…“You know…keepin it real.”
-Guys like the “mortgage gangsters” (see youtube.com) in CA.

I won’t call this person out…but they offer a “freedom loan” where the person has “no mortgage payments for 6 months”. The freedom loan is really a cash out refinance with the proceeds deposited into a new bank account “that the lender required” with auto bill pay setup to pay the mortgage. (I must say this is genius marketing, but unethical and totally representative of the shady and underhanded folks that have entered the business.

It seems that as foreclosure rates increase these type LO’s will be with us a bit longer as I have heard these types state that they “…hate conforming loans. I would rather have subprime where I can spank them for 4 points and have them think I worked a miracle.”

On the positive side. I used to work for a company that would hire anyone with a pulse…I was one of those people with a pulse. lol
I’m now with a company that puts prospect employees through a gauntlet. It’s nice to not have idiot slime balls as co-workers.

I’ve grown tired of the retial inviroment and am pursing a wholesale position(off topic).
In my experience the best way to see if somone is qualified is to ask for references. If someone can’t give you a few people to call who had loans similar to yours, had a positive experience and are not “phantoms” (thier cousin Joe) RUN FOR THE DOOR.

I live about 1/2 miles from Crusaders office…LOL…never used them though…i emailed them for info on a possible deal and they wanted money from me. I didnt even know if they could do it…

anyone ever deal with Lantzy Financial…

i checked them out once on a deal…they are in boston …wanted a fee as well but this was after they said yes to the loan and refund it if the loan didnt close. However the no doc type had a great rate and the full doc had higher rates…found that odd,.

6% Interest Only for a commercial loan…with a prepayment penalty of 6 months. No way.

The fed has been hiking like mad over the last year and commercial is more sensitive to fed actions than residential, yet the rates promoted for the Crusader commercial program have remained unchanged…Magic? ::slight_smile:

At 90% you will need 125,ooo down. Do you have anything you can cross collateralize? You definite have experience, that is good. What is you r fico and DCR ratio? Is it going to be in your LLC?

The financial advice previously given is well-informed but to “approach” this deal correctly; you need someone who understands real estate investments, especially commercial. Every deal needs to be properly “structured”. Good luck!