Financing Options for Multi-Family

My experience has been strictly with Fannie and Freddie as it pertains to financing apartment property, but I have only underwritten deals > $20M.
For smaller apartment building, which seem to the the popular choice of investment for those just starting out in commercial investing, would one typically go out to traditional residential lenders? For example, a 6 unit property with a price of $1.2M, what options does the buyer have to finance?
In Buying Property - Asked by Eric G. - Jul 29, 2009
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Answer(s)

Marci A.
Owner/Investor
Wimberley, TX

Bank Portfolio or Asset Based lending options would be a good financing avenue to explore. As an experienced real estate investor, your rent rolls could be counted as cash-on-cash, which would improve your DTI (Debt to income ratios). Cross-collateralization can also be used to reduce your 'cash to close' (and without liquidating assets). Appraisals aren't as much of an issue because they are not underwritten with BP as with agency lending (comparing comps). The borrower's global financial position is taken into consideration more aptly then by the application of agency lending proprietary guidelines. This is not a new type of lending, but the 'old' way, prior to the onset of Freddie/Fannie approximately thirty years ago. Hope this helps. marci@ldmtg.com

Jul 29, 2009
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John S.
Broker/Agent
West Palm Beach, FL

The amount of loan is based on Gross income. Take the gross income and subtract 41% for expenses. Take that number and divide it by a debt coverage ratio of 1.15. What ever you come up with is the amount of the gross income the bank figures you will have available to pay mortgage. They are very conservative, so to make deals work, you need higher down payments or higher rents. Good Luck. Apartment Ace./// mrjohnstevens@hotmail.com

Jul 30, 2009
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Mike F.
Broker/Agent
Atlanta, GA

For properties containing four or less units, many off the shelf products exist. Just call a residential mortgage broker in your area to see what's available.

Jul 30, 2009
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Gregory NNN G.
Broker/Agent
San Francisco, CA

What's the gross rent?

Aug 14, 2009
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