Jacqueline,
It does not have to do directly with profit margin. It has more to do with the value of the property. Investors, lenders and appraisers use the cap rate to estimate the purchase price for different types of income producing properties. However, as you know the better deal you get on the purchase price, the more money you can make hence the effect on the profit margin.
Hello,
We have structured 100% financing on apartment buildings under certain circumstances. It is not common and only has worked for us under the idea that 100% financing does not necessarily mean a 100% lien. Here are the two situations we pulled it off:
-Principals have sufficient net worth/assets to secure the top money with other assets. We have pulled this off with CD pledges used as security versus the cash being put into the property acquisition.
-When you bring an equity partner in for the top money. Often an equity partner has the ability to structure the investment. This will only happen if the collateral is under valued. For example, if a income producing property is only half leased because of mis managment, its value can be increased quickly after acquisition. Equity lenders know that the investment has potential to gain value and you can negotiate a buy out upon refinance of the equity partner at a certain return.
Short of these two types of situations we have had no success on 100% commercial financing.
Hmmmm… interesting how many ideas and concepts etc. there are out there. Let me give it to you straight form the source.
We do these all the time.
The parameters for a 100% Apt bldg loan are as follows.
MAX LOAN $2,000,000
FICO 700+
OCCUPANCY 20 or more units
RESERVES 6 months PITI
RATE 1st @ 7.5 - 7.99 2nd 9.25 - 9.9
It is a straight 80/20 combo loan just like a residential 80/20 combo
No Equity partner is necessary
The reason 100% is possible is because apartment bldgs are a relatively safe investment and very predictable.
We also have a second scenario for 5 - 19 units where we do alternate financing with unsecured loans for those who qualify and use that for the down payment and do the balance as a conventional loan.
Hope this helps.
Jeff
Thanks! Gurus. It helps alot.
W
4eem,
I was just reading through this thread and just read your comment and it struck me that I needed to respond to it as to not misdirect investors into thinking that you have any idea what you are talking about.
you obviously do not know what you are talking about.
We can do 100% financing on apartment buildings and land deals.
A wise investor will always use OPM rather than their own cash. It allows them to leverage their cash for other projects or areas where they can make more money with their money than the interest they pay on it.
Your pejorative remark about “stringing borrowers along” would indicate to me that you are either not a very experienced investor and at worst, not a very wise investor or thirdly and broker who cannot provide 100% financing.
100% financing is not just for broke people who can’t come up with a down payment, it is for a wise investor who has other uses for that money.
I will, however, give you one point. An investor that does not have the money for a down payment is not an investor, he is a dreamer. But do not confuse the two. There is a difference between those who cannot afford the DP and those who choose to use the money for more profitable purposes.
That all being said…
Smile, God loves you and all else is just stuff 
Why go through all of that when you can get a simple 90/10 or 80/20 on them?
The quickest and most efficient way to a destination is straight.
Why go though all the bother of going this way or that.
Jeff,
I never said 100% was not available and we both know how 100% commercial is accomplished. We both know that 90% of the time borrowers requesting 100% do not qualify because they do not have strong assets. I’m by no means trying to say that you are one of the brokers who “strings people along”. I’m familiar with the products the Crusader Commercial offers and I find them very valuable to investors. But lets be honest here…It’s not a multi-unit building with a 1.75% DSCR thats going to get a 100% commercial loan, it’s the building plus stocks, equity in other properties, visa and mastercard recieveables, and other assets that can be used to secure the financing.
4EEM,
Actually the 100% combo loan is exactly that:
It’s either and 80/20 or a 90/10 combo just like a residential loan.
This particular loan works exactly like a residential loan.
Jeff
Whats the catch?
No catch,
It’s a unique product.
Requires 700+ FICO
Must be 2 MM or less
Must be 20 Units or more
can choose 80/20 or 90/10 (the only difference is the rate on the second. 90/10 will have 9.99 on the second - 80/20 will have closer to 9.25 on second. In either case first is set based upon strength of financials etc.
Interest rates are 7.5 - 7.99 on 1st and 9.25 - 9.99 on 2nd
Must have 6 months P.I.T.I. (negotiable depending on strength of the deal)
Those are the basic parameters of the deal.
Jeff
Can a line of credit be used to satisfy the Reserves requirement?
I believe that the funds must be in the bank for VOD, however, I do not believe the funds are sourced.
Jeff
Ok…I’ve got a client and we have a property in contract. 30 Units. $625K purchase price. $113k gross annual income. Tenant pays all utilities… Property cash flows more than enough. 29 units rented out of 30. Has over 100K in reserves. 760 FICO.
crusadercommercial,
You seem to have an excellent program!
crusadercommercial,
When doing such a deal (20+ units and below 2M), what is the DSCR?
Would you consider my personal income in calculating the DSCR? Thanks.
Hi Prashant,
I don’t want to make this a sales forum.
Please either email me or go to my website and enter loan inquiry.
I’ll be glad to answer all of your questions there.
I can answer the question on dscr though…
DSCR can only be counted for the property. That is the whole purpose of DSCR… to see if the property has sufficient cash flow.
Keep in mind that a lending institution is always thinking in terms of what happens if you default and they have to take back a property. They want to make sure that it is resellable on it’s own merits.
However, your income can be considered when determining ability to pay and debt to income ratios etc.
Jeff
Jeff