New to commercial investing- brokers?

General Real Estate Investing
1

I am new to commercial investing and am looking to get started investing in apartment buildings. What is the best place to start (besides reading the posts here)? I have been told to call brokers and get property setup sheets- is this correct? Also, are any of you on here commercial brokers in PA because that is where I am from? Thanks, Mike

2

Best thing you can do is figure a price range, go find a property that you are interested in and then call a broker or lender and run the deal by him/her.

I would be glad to answer any of your questions and walk you through the process.

Jeff

3

Hi Mike,

Apartments can be a great investment for you. My advice to you, is to ask yourself a few questions before you go talk to a realtor or a broker.

  1. What are your expectations from owning the apartment buildings (ie a certain cashflow, appreciation, etc)?

  2. What type of managment will be running the apartment buildings (this will help you decide how many units you will want)?

  3. How much liquid cash do you want to put into this purchase? This will help you determine how much of a property that you want to look for. A good rule of thumb is that you will need 20 - 30% down plus 3 - 5% closing costs.

Now that you know what type of building you want and how much you can afford, find a commercial realtor or network with other investors to find the property that meet that criteria.

Once you find the property, then contact a broker (your broker doens’t have to be in PA in order to help you). Your broker will be able to help you analyze your deal and get financing for you. Your broker will need a lot of details on the property that you want to purchase, so you will need to make sure that you get that from your realtor or the seller (income and expenses).

Good luck to you!
Patti

4

Hi again,

Sorry to correct you Patti,
But we can do Apartment loans at 100% financing with FICOs above 700 if there are 20 or more apartments under $2,000,000.
If the deal falls within those parameters 100% financing with no money down is extremely doable.
The only out of pocket expenses for something like that is the appraisal and perhaps a small application fee that is collected only if the loan looks closabel. IF you have a recent appraisal (less than 4 months old) you don’t even have that expense. Also, Commercial loans don’t necessarily follow the 3 - 5% closing cost rule of thumb a it does in residential loans.
There aren’t tons of things that we need when we start a loan.
We begin with a basic loan inquiry to see if the loan makes sense and then if it does there are some basic pieces of information that we need. The information is pretty much the same as any commercial project that has rental units.
What is important are things like rent rolls and DSCR’s (debt servicing ratios) which are generally in the range of 1.0% to 1.5% on the high side.
DSCR is obtained basicall like a balance sheet of expenses:income

I hope that helps.

Jeff

5

Sounds like a great financing program…is that 100% debt financing or is it a debt/equity program?

Are you carrying the second if it is debt financing?

6

Jeff,

Maybe you’ve read more into the posters’ original question than I. His basic question was how to get started investing in apartments.

Yes, 100% financing is available, but it should be evaluated carefully. My comment was in general terms, so that he could get a feel for what he could realistically afford. This will help him when he’s looking for a property.

Patti Porter

7

Hi Patti,

I still don’t understand. Why is the fact that they want 100% financing make it something that needs evaluating more carefully than any other LTV. We do them all the time. The 100% apartment bldg. loan is one of our most popular loans.

8

Agreed with Jeff.

Specially for 1st time commercial investors, generally you would want 100% financing or close to it. Use Leverage as much as possible. Plus most 1st time investors don’t neccesarily have 20 - 30 % to put down on a commercial building.

There are a bunch of great programs available but my suggestion would be to use leverage(OPM) to build up you portfolio as much as possible. Once you accumulate a few assets and are at the selling stage, then consider doing more down on your next investment with 1031 exchanges to generate more cashflow.

Jordan

9

Lightbeing…

Very sound advice.

Jeff