Multifamily Finance Questions

Howdy ya’ll from Tejas!!! I have been looking at a couple of 100+ unit apartment complexes in south San Antonio (think stage 2 buyer’s market) that will support 100% financing with DSCR’s of 1.5 and 1.25 respectively at rates slightly above prime. I have been told that lenders look at the property’s merits first and the borrower’s merits second. I have also been told that lenders will apply 75% of the NOI to my personal financial statement to help me qualify for the loan. I have also been told that lenders will take an equity position in these properties. Both are well established and recently rehabbed. I have been an entrepreneur for two years and failed in three businesses. While my financial IQ has increased by leaps and bounds in this school of hard knocks, my credit has taken a beating!!! How do I find a lender who will lend based primarily on the property’s merits? Also, is it responsible of me to put these deals under contract without already having the almost inevitable partner lined up? Finally, when should I approach potential partners for these deals? After due diligence, before, during, etc. Thanks ya’ll!!!

There are plenty of lenders that are “equity” not “FICO” driven, but they are not going to give you 100% financing.

In regards to putting the properties under contract without having financing set-up…sure, if your willing to part with your deposit and lose the faith of some potential industry partners if the deal falls through,

Thanks Patrick. I am NOT willing to burn ANYONE, especially not for mere money!!! People are awesome, but money can grow wings, if you know what I mean. I do believe these are excellent deals, however, and know that I can get 80% financing on them. For the remainder, I will need a partner. My only concern with approaching a potential partner is timing. While 95% of the investors I have met are of high moral calibur, it would be naive to think no one would steal a deal from me. The reason I want the properties under contract is to prevent this scenario. Also, how can I get financing without performing due dilligence? How can I perform due dilligence without having the properties under contract? Thanks again and God bless!!!


I was not trying to imply that you were trying to burn anyone. What I was trying to say is that before you go into contract on a deal make sure it’s not going to fall through because of financing. The min. deposit I’ve ever seen on a commercial deal is $1,000. If you don’t close you are going to lose your deposit and the people involved may not take you serious in the future.

There is 90% financing available.

You can request the properties financials without going into contact. You may even be able to have an appraisal conducted without being under contract (it’s a stretch).

I would not worry so much about someone stealing a deal from you. Someone who is going to be a finance partner is probably more interested in seeing a return on their investment than owning a commercial property.

…There are contracts you can have potential partners sign before giving details about a particular transaction that will create liability if they cut you out.

Thanks again Patrick. I was not offended in the least by your post. Quite to the contrary, you have been extremely helpful and candid. These last bits of information are particularly useful. If I am thinking correctly, the contract you are talking about would be something similar to a non-compete agreement??? I will run a search for 90% financing and see what I can turn up. Finally, where do I find these private finance partners? I am new to Austin so I am just now joining the RE club here and in San Antonio. I will probably come across some very good POCs at the first meetings, but any further advice will be extremely helpful in the meantime. I will do some research on the www while waiting for a reply. Thanks again for taking your personal time to help me!!!

I can send you a list of multi-family lenders if you would like.

REI meetings are a good place to find investors. Note: You do not want a loan. You want a partner. A partner giving cash does not cause problems with financing, but someone giving you a loan could.

Talk with some heavy hitters in the mortgage biz. There are a bunch of folks who cash out their properties with no real reason in mind.

Patrick, you rock!!! I would love a list of multifamily lenders. I have added my email address to my profile, since I believe it is against the forum rules to put it in the body of the post. I have a friend of a friend who is a mortgage broker. He might be interested, or know of someone who is. I will definitely try to network my way to a partner. I’ll also talk to my accountant and see if he knows of anyone who has excess cash they need to get invested. It has been an absolute pleasure dealing with you here in this forum. You have been VERY helpful and VERY knowledgable. Feel free to keep in touch, you seem like a great guy to know!!! Thanks again!!!

Hey Michael,

I’m an investor in Michigan and we have 30 units all together but are looking to break into a larger property ourselves. In the past w/ our 10 unit and 7 unit, we put an offer—full asking price but the seller would have to hold 10% financing. It worked in both cases. Finance company didn’t care w/ the seven unit who held the 10%, on the ten unit they wanted us to hold 10% and the seller to hold 20% —seller agreed. Its worth a shot, that way the seller still has a pretty secure investment plus his cash. We are just about to put an offer on a 48 unit this way. We have a little over a yrs. experience behind us so we’re hoping this helps.
Patrick if you could email me a list of your 90% financers I would greatly appreciate it.
Thank you,

Thanks for the encouragement, Wendy!!! I just had a seller accept an offer today for $1 mill below the asking price!!! This puts the deal at over a 10% cap rate and a HUGE cash-on-cash return!!! Now the hunt for finance partners begins… This is a lot of fun!!!

Oh my… I just ran the numbers with more scrutiny and this is an INCREDIBLE deal!!! With 20% down this has a 31.79% cash-on-cash return, at 10% down an amazing 56.68% cash-on-cash return. Oh yeah, did I mention this is a poorly managed complex at 70% occupancy??? Talk about upside potential!!! I can pay 15% ROI to finance partners and still cash flow $10,000.00 per month, based on YTD financials!!! I’ve just got to say it… FAVOR AIN"T FAIR!!! I don’t care if I have to hustle from sun-up to sun-down to put this deal together, it will be worth it!!! Thanks again everyone!!!

P.S. I am trying to keep my Sustenance of a positive mental attitude through the assumption of a negative result going and contain my excitement, but it sure is hard…

thats awesome!! keep us posted as it goes…

“I can pay 15% ROI to finance partners and still cash flow $10,000.00 per month, based on YTD financials!!!”

That’s great, but why would you want to pay 15% to finance partners when you could pay 7/8% to the bank?

I don’t have any desire to pay 15% interest, but if I am going to use 100% OPM, and can’t get 100% conventional financing, I don’t know if I have other options. Any suggestions would be apreciated!!! I’ve also done the calculations and paying 15% on a 10% down payment to a finance partner provides the same cashflow as 7% - 8% financing on the full amount. I only plan to hold the property long enough to qualify for a 1031 exchange and raise the occupancy rate to 90%. At the end of this deal I should have aprox. $3 million in equity to 1031 exchange, so I don’t mind paying out the nose to get to that point. Besides, $10k in positive monthly cashflow isn’t bad!!! Let me know what you think!!!


Could you email me the list of 90% also?


Could you email me the list of 90% also? Thanks

Oh great! You wait until I eat my muffin and THEN have a “foodfight”!

Please send Patrick a PM if you want his magical list…


I don’t want to send anymore “magical lists” :cry:

Just check out the “Scotsman Guide”

You lasted longer than I might have…


What is DSCRs?