Multi Unit Apartment Financing

Hello Commercial Financing Experts:

In the commercial apartment world do the lenders base their amount lended for a property on LTV or do they ask you what the purchase price is going to be and then offer a % of that price?

Example: $1,000,000 property that I am able to buy for $700,000:

a) Does the bank offer me let’s say 70% of the $700,000 purchase price for a total loan of $490,000?..meaning I have to come up with the remaining $210,000.


b) Will a bank see that the property is worth $1,000,000 and because of that have no problem lending me 70% of the value of the property for a total loan of $700,000…which in this case is 100% financing.

Thank you for the clarification!


Most banks are going to want you to have a certain percentage of the purchase price for a down payment no matter how good the deal is. They want to see you have something invested in the deal so you don’t just throw up your hands and walk away if times get tough. The chances of you just walking away are much lower if you have $210k of your own money in the deal rather than if you just signed some papers for 100% financing. I’m able to pull 100% financing on SFHs right now with a local bank, but I’m sure they would not lend the type of money you’re talking about with nothing down from me.
This is the reason most people are never able to do million dollar deals. Most people can’t come up with the amount of money to get into the loan.

Justin is 100% correct. When the credit markets crashed last September the rules of the lending game changed completely. Just to reiterate, the lender is gonna want you to have skin in the game, regardless of how strong your deal is. Now where you can get creative is having your seller “fund” your DP for you in the form of a seller-held second mortgage. Try to get in the mindset that REI is just a big game, a game that you need to know how to play and bend the rules when necessary to your advantage.

Thanks folks. I sure appreciate it.

When the seller carries that second note as ‘seller carryback’ financing do they usually expect a down payment also or are most of them simply happy to carry the entire remaining amount to avoid paying the large capital gains tax if they were to sell outright?

Any suggestions on locating these owners?

Your expertise is gold! Thank you.

Hate to tell you this, but “A” is largely correct, and is in a large part why most large properties I have seen “move” won’t do so for anything less than a 10% cap, and “distressed sales” call for a 12-15% cap.

In almost all 1 millon and up cases, lending institutions are going to want to see 20-30% cash down. Worse, about 70% of the lenders I have spoken with will not allow any form of a “seller second”. I have personally seen some private money types willing to allow a seller second carryback, but none have been from a bank or a “portfolio lender”.