Financing Apartment Complex

Financing, Hard Money Lenders, Private Money
1

Hi,

I want to purchase a 24 unit apartment complex with as little money down, and closing cost as possible. How can I do this? Asking price is $700K, and the seller will not finance. I noticed that the property does not have sub-metering system for the utilities. What are my options. FICO score 700+

Thanks,
PR

2

Without seller participation (a seller 2nd mortgage), you are restricted to 90 LTV (unless this will be a owner occupied transaction, at which you could potentially qualify for 97% financing).

Regards,

Scott Miller

3

Depending on the loan you get, your FICO score may or may not matter. In other words, if you go for a non-recourse loan, and do an income based appraisal, the property itself may the most important qualifier for the loan rather than your FICO score. Though the seller is not willing to take a second, you may be able to find another lender who is willing to carry a second, providing that the income is strong enough to support a reasonable debt service ratio. Do you know what the current income is on the property and whether or not the rents are at market or below market value? Those are some questions that can help in determining the best financing option for you.

4

Taking this approach will at best allow for a 95 CLTV scenario…

Regards,

Scott Miller

5

Thanks for everyone’s recommendation for purchasing this property. Here are some stats on the property:

Asking Price: $650,000
Scheduled Gross Income: $137K
Total Expenses: $58K
NOI = $72K
Rent is $545 per unit (@market rate)

How can I obtain this property with as little of my own money as possible?

THX,
PR

6

Something doesn’t quite add up. Are all the units rented at $545/month or are there some that are rented for less. The reason I ask is that at $545/month x 24 units x 12 months -5% vacancy, the scheduled gross income should be $149,112 not $137K. That would raise your NOI and potentially your value. At a 10% cap rate, the value of the building would be over 900K. The significance of this is though it’s not likely to get a purchase loan based on that value, when the asking price is only 650K, the refi potential is great. Even if you were to refi at 80% LTV, which is easily doable, you would be looking at 720K; which is 70K over asking price, provided the figures you’re quoting are accurate.

The other things to consider are:
What is the condition of the building?
Do you need to do any rehab?
What is the vacancy rate?
Is there currently management on the premises or would you have to take that on?
Why is the seller selling? - very important question

Given how small the property is, I would recommend that you inspect every single apartment to make sure that what they’re telling you is true. Examine the rent rolls and expense statements; try to match up the names on the rent roll to the actual occupants during your inspection. If everything is fine and the numbers do add up, then it seems like you may have a good deal on your hands. You can check with EZloans about the 95% CLTV to see if that can be achieved. If so, you would only have to come up with approx $33K. But the potential upside is great because within a year you could be pulling out $70K.

7

My apologizes, it’s a 21 unit at $545 per unit. I’m planning on performing an extreme due diligence to make sure the numbers add up on this property. The owner is over 70 years old, and want’s totally out of this business so that he can retire, and move to Florida. I’ll ask about the property management who is currently there – I was going to use my own, but if the fees are better, I’ll keep the current PM company since they know the property. FYI – the original price was $780K, but I talked him down to $650K. I was trying to figure out a way to have it as an owner occupied investment if I am planning to move to the state and reside in the property after I purchase the property. Currently, I reside out of state (renting), any suggestions?

THX,
PR

8

If this could be structured as a owner occupied transaction (and you can go FULL DOC), there is a potential for 97% finanicng…

Regards,

Scott Miller

9

What kind of a rate and amort would he be looking at EZLoans?

10

At the risk of sounding evasive, there are just too many variables that have gone unmentioned to respond intelligently—commercial lending is different from residential…

Regards,

Scott Miller

11

I’d rather see someone not respond that make something up or blindly quote guesstimates as some folks tend to do. Definitely the smarter way to go waiting for the rest of the info.