How do I pay all the people I need to buy a apartment building

Just starting out my question is for the people on here if your looking at a apartment building you want to buy and have very little money to start how do you pay every one like broker,attorney,appraiser,etc
In Buying Property - Asked by terrance w. - Apr 10, 2009
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Sheri D.
Listing Administrator
Milwaukee, WI

1st Thought - Don't Buy it. If you can't afford topay the people involved in the purchase transaction, how do you expect to do any potential repairs or make it if someone moves out and it is not rented for a few months.
If you do go forward with buying it anyway, a broker is often paid by the seller, not the buyer. And if you are working with a Good Broker, you may or may not need the attorney, unless you are buying it under an entity name, rather than your own personal name. As far as appraiser, inspector, etc - maybe you can borrow money from some you know with the promise to pay it back at a regualted schedule with interest. Or if the property is substantially under market value, you can get an equity loan a few months after purchase and pay the person back in full then.

Apr 10, 2009
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Paul S.
Glendora, CA

Costs of purchase will vary depending on the number of units. Once you go over 4 (which is referred to as "conforming") the ball game changes. 5+ units will require a greater percentage downpayment and will now have to conform to a debt coverage ratio (DCR). You may need to get as high as 1.25 or more with the DCR. What that means is that for every dollar of debt you are paying out you will need $1.25 in net income. Generally speaking the DCR requirement causes a greater amount down requierment, which lowers the loan amount and monthly payment, and increases the net income. Lenders will also factor in a vacancy rate (min 5%)and management fee (5-10%) when calculating the net income for the DCR.
If you are buying 4 units and under financing with less down is available and generally a DCR is not used. However a factor (often 75%) will be used against the income stream i.e. you get $1000 per month net income, the lender will give you credit for $750. The factor can change with the lending climate.
Lenders for units will want to see that you have the ability to pay for them if something adverse happens. If you are broke the property itself probably won't qualify to let you finance it. You might find an owner that will carry paper with no money down but be careful there. There will be a reason someone will do that and it usually isn't good.
If you would like a more specific answer I will need more specifics about what you are trying to do. I can be reached at 626 485-5163 or
Paul Sylvester, CCIM

Apr 13, 2009
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