Commercial Financing Requirements and Advice PDF

8/27/2017 Commercial Financing Requirements
Newest Posts Trending Commercial Start a Discussion
Commercial Financing Requirements

Multi-Family and Apartment Investing Forums 28 Replies
PREV 1 of 2 pages NEXT Log in or sign up to reply
Damon Wong from Arlington, Virginia

posted 4 months ago
So I started my search for nancing a multi family property and was hit with this response:
"You are asking for a 1.9 million dollar loan. You will need at least $380,000 (20%) to put down
on the property + loan expenses and 9 to 10 months monthly payments. Your net worth will
need to be at least 1.52 million dollars. Do you meet these requirements?"
I get the 20% down (80% LTV), but not entirely the other two, is this standard?
9-10 months monthly payments I can understand (although not sure if 9-10 is high or not)
because the bank wants to ensure you're covered for emergencies or to get o the ground---
similar to some SFR nancing requirements. But, why does my net worth need to be $1.52M.
Does this change if/when I form my business entity for the purchase? I don't understand how
they calculate the $1.52M. Also, there is no consideration for the property. I thought
commercial loans focused on the property's income vs my personal status? If this property
veri ed it generates $1M in annual income (it doesn't, but just an example) wouldn't that be
enough?
Just looking for some education on the underwriting requirements for multi family. Thanks.
https://www.biggerpockets.com/forums/432/topics/441420-commercial-financing-requirements 1/19
Brian Adams Syndicator of Large Apartment Buildings from Glen Mills, Pennsylvania
replied 4 months ago
@Damon Wong most lenders require that you as the loan sponsor have multifamily experience
and net worth equal to or exceeding the loan balance and 10% of the loan balance liquid post
close. Generally this equates to about 12 months of debt service.
So the request by this lender is standard and sounds reasonable.
Brian Adams CPA, Adams Investor Group, LLC | 2159671464 |

http://www.AdamsInvestorGroup.com | Podcast Guest on Show #135
Seth Williams from Winthrop, Massachusetts

@Damon Wong I would shop around to a di erent lender. I met with a lender today ( portfolio
Lender ) that will allow me to cross collaterize other properties i have instead of the down
payment and sometimes there is no personal guarantee. Its all going to depend on the bank.
Some banks, sell your mortgage commercial or not -- Others, will keep it in house ( portfolio ) as
in, in their portfolio to make some extra cash. I would do some more due diligence around the
type of nancing & make sure you have a few props in mind. If you don't have a lot or any
experience as a landlord, this is going to certainly work against you. @Upen Patel , you in this
game? not sure if you can do this type of stu but gured id tag a guy anyway.
Eric James from Malako , TX

@Brian Adams thanks for the info. I too would like to one day purchase multi family
apartments and it's valuable to have an idea of where I will need to get too nancially to make
this happen.
@Eric James you are welcome.
@Seth Williams I buy 100 to 400 unit deals, I amclosing a 556 unit deal next week. For large
assets like this I haven't heard of a lender who will cross collateralize, but it is always good as
you suggestto shop around.

Brent Shryock Real Estate Lender from Jacksonville, Florida

@Brian Adams thoughts are spot on for a general rule of thumb for net with and liquidity
requirements.
Setting up an LLC won't change your net worth requirements considering you are the owner of
the LLC.
The lender is not going to use a property you don't own into your net worth calculation.
Think of commercial lending as looking at theasset rst vs traditional bank lending as "who's
my guarantor rst".
In my space Non-recourseCommercial lending westill wantto know who the borrower is and
still need nancial strength, but we underwrite the value of the asset rstnot the value of the
borrower.
Eric James from Malako , TX

What type of rate and terms are common for that type of loan?
Michael Le from Humble, Texas

@Eric James , the loan terms I'm seeing right now are roughly 75-80% LTV, 4.6-5.0% rate, 1-3
year IO (interest only), 7/10/12 year terms.
Michael Le, Bayou City Multifamily

@Brian Adams @Seth Williams @Brent Shryock @Michael Le @Eric James
Thanks all for the comments. I have 5 single family homes now since 2009 and wanted to break
into the multi family market with this rst 9-unit property I found (after searching for a while). I
guess I just didn't realize that with non recourse loans the lenders still require substantial
personal nances to back the loan. It threw me o when the initially inquiry from the lender
was all about me and didn't even ask about the actual property or my experience. I'll continue
to shop and around with the advice mentioned and see what I can do.

@Damon Wong , the actual property is paramount and your experience will de nitely matter.
But if you don't meet these basic requirements there is no reason why the lender will spend
time to look into the other two. That's why they let you know that upfront. Also know that you
can bring in another partner(s) to help meet the net worth and liquidity requirements.

@Michael Le those rates are pretty spot on, but don't forget about FHA multi debt. 85% fully
amortizing 35 year loans. All in rates under 4.25.

@Michael Le thanks for the insight. I will de nitely seek partners to help meet those. Great
pointers.
@Brent Shryock are there di erent (or more) requirements for FHA to consider or is there any
reason I shouldn't shoot for an FHA multi vs 'conventional'?

FHA multi nancing can be daunting to get and have a lot more requirements than traditional
agency loans. If you Not a seasoned operator they can a real challenge.
Seth Williams from Winthrop, Massachusetts

@Brian Adams Those are some big deals! I only have a few properties, but the value around the
9 unit purchase price in @Damon Wong s teal seemed similar, for instance I owe 1.1, value is
1.6-1.7, I can pool these two into one loan, and use some basic equity to grab another so I don't
have to do the "20%" down, since a lot of it will come from equity. Thats all I was thinking, even
my guy too would want the personal nance review though, no doubt! Good Luck on this deal
Damon!
Frank Chin Investor from Bayside, New York

I did commercial loans some years back, also looked into commercial real estate loans.
Back then, most lenders require 30% down. So what they are asking for is not too far o . You
might also try a few lenders. Loans of this size in mostly require some kind of loan committee
approval at the bank. So if you're new at this, you plunk everything into this deal, the loan
committee will ask the loan o cer, what happens if there's unexpected expenses, and he's got
to have an answer.
Bruce Petersen Investor from Austin, Texas

@Eric James @Michael Le
I just rate locked at 10 years, 79% LTV, 4.39% and 4 years of IO for a 200 unit.
Bruce Petersen, Bluebonnet Asset Manager LLC | bruce@apt-guy.com
Mike Dymski Investor from Greenville, South Carolina

foreclosures = none
bankruptcies = none
DSC = 1.25+
net worth >= loan amount
liquidity >= 9 months (Freddie) or 10% of loan balance (Fannie)
credit score > 700
These vary by lender, borrower, and property. I am in the market for a property in excess of my
net worth and my lender has given me verbal authority to proceed. The rubber will meet the
road when/if I have something under contract (and I have a JV partnerships lined up should
they change their mind). I have an existing apartment loan with them and a commercial line of
credit in process; so, having a relationship is one way where the requirements start to vary.
Agency debt will have less variability.
Many investors partner up to meet commercial lending requirements. Joe Fairless has a
podcast episode on loan sponsorship.
Je Greenberg Investor, Syndicator, Mentor/Coach from Camarillo, California

@Damon Wong just to emphasis the partner that becomes your "loan enhancer", may not have
to be a partner in any other way. Of course they will demand a chunk of the deal. Part of a deal
for you, is better than 100% of no deal.
@Brian Adams congrats and good luck on the 500+ unit deal.
Je Greenberg MBA, Synergetic Investment Group, LLC | je @synergeticig.com |

805.372.1799 | http://www.synergeticig.com | Podcast Guest on Show #115
Patrick S. Investor from Indianapolis, Indiana

Great info here. Thanks OP for posting and everyone else for answering. Already learned a ton,
for example net worth >= loan amount. That seems odd considering you're borrowing for 1.
Leverage and 2. Because you don't have that much money. I believe it, just didn't expect it.
Patrick S., Ridgemont Capital Partners
Cody L. Investor from San Diego, Ca

I just got a $3+m loan on a 100+ unit deal. Here is what I got:
80% LTV
4.5%, xed 5 years
6 year total term (2 oat years after 5 xed)
20 year am (was going to be 25 but appraiser said 20 year life of building so am was shortened.
There is plenty of cash ow so I don't normally care about amortization).
Recourse.
1/2 point orig fee
Minor prepay (2,2,1,1)
Local bank
I got a Freddie loan o er in same building that was better in every way.
80% LTV
4.1% xed 10 year
30 year am
Non recourse
Terrible prepay (yield maintenance. Or 4.3% with a 44,33,22,11 prepay)
Selected local bank as it's just sooo much easier to close (major factor for me). Plus I loved this
deal and knew my local bank would close vs some unknown issue causing Freddie to ake.
What's funny is I can get this $3m loan pretty easy. Yet re nancing the home I've lived in for 12+
years, owe less than half the value, never missed a payment, 700+ credit, etc is impossible due
to tax returns.
Our lending rules are idiotic.
Brandon Heimsoth Investor from Maryland Heights, Missouri

A little of topic but...do retirement accounts count toward net worth in the bank's analysis for
these types of deals?

@Brandon Heimsoth , yes it does. Anything that would make sense to be counted towards your
net worth - cash, government securities, cash value of your life insurance, stocks & bonds,
retirement plans, real estate,personal property, business assets, cars, etc.
Upen Patel Lender from Vienna, VA

@Seth Williams Thanks for the tag.
@Damon Wong The net worth requirement by the lender is for the loan product they have,
Freddie Small Balance. It is a requirement for that. The good part is that if you meet the
requirements then you can get a non-recourse loan, with 20% down and great rate.
That does't mean that you can't get a recourse, 20-25% down and take bit of a hit on the rate.
Recourse loans are bank speci c, as they are truly portfolio loans. So you will get di erent
terms.
I would highly recommend connecting with an experienced commercial broker. In this one cast,
I would say the broker fees are worth every penny.
Upen Patel, The Federal Savings Bank | upen_patel@hotmail.com | (571) 3315161 |

http://loansbyupenpatel.us | Lender # National Lender NMLS# 1374243
Patrick S. Investor from Indianapolis, Indiana

@Upen Patel What do commercialbroker fees typically run?
Patrick S., Ridgemont Capital Partners
@Patrick S. for the deals I work onI see 1% of the loan amount.

1 2
EXPLORE COMPANY IMPORTANT SOCIAL
Membership About Us Terms of Use Facebook
Community Press Rules Twitter
Education Advertising Privacy Google+
Marketplace Careers FAQ YouTube
Tools Stats
Perks Contact Us
2004-2017 BiggerPockets Inc. All Rights Reserved.

Commercial Financing Requirements and Advice PDF

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Commercial Financing Requirements and Advice PDF

Enviado por

Direitos autorais:

Formatos disponíveis

8/27/2017 Commercial Financing Requirements

Newest Posts Trending Commercial Start a Discussion

Commercial Financing Requirements

PREV 1 of 2 pages NEXT Log in or sign up to reply

Damon Wong from Arlington, Virginia

So the request by this lender is standard and sounds reasonable.

Brian Adams CPA, Adams Investor Group, LLC | 2159671464 |

Seth Williams from Winthrop, Massachusetts

Eric James from Malako , TX

@Eric James you are welcome.

Brian Adams CPA, Adams Investor Group, LLC | 2159671464 |

Brent Shryock Real Estate Lender from Jacksonville, Florida

Eric James from Malako , TX

Michael Le from Humble, Texas

Michael Le, Bayou City Multifamily

Damon Wong from Arlington, Virginia

@Brian Adams @Seth Williams @Brent Shryock @Michael Le @Eric James

Michael Le from Humble, Texas

Michael Le, Bayou City Multifamily

Brent Shryock Real Estate Lender from Jacksonville, Florida

Damon Wong from Arlington, Virginia

Brent Shryock Real Estate Lender from Jacksonville, Florida

Seth Williams from Winthrop, Massachusetts

Frank Chin Investor from Bayside, New York

Bruce Petersen Investor from Austin, Texas

@Eric James @Michael Le

Bruce Petersen, Bluebonnet Asset Manager LLC | bruce@apt-guy.com

Mike Dymski Investor from Greenville, South Carolina

net worth >= loan amount

liquidity >= 9 months (Freddie) or 10% of loan balance (Fannie)

credit score > 700

Je Greenberg Investor, Syndicator, Mentor/Coach from Camarillo, California

Je Greenberg MBA, Synergetic Investment Group, LLC | je @synergeticig.com |

Patrick S. Investor from Indianapolis, Indiana

Patrick S., Ridgemont Capital Partners

Cody L. Investor from San Diego, Ca

Our lending rules are idiotic.

Brandon Heimsoth Investor from Maryland Heights, Missouri

Michael Le from Humble, Texas

Michael Le, Bayou City Multifamily

Upen Patel Lender from Vienna, VA

@Seth Williams Thanks for the tag.

Upen Patel, The Federal Savings Bank | upen_patel@hotmail.com | (571) 3315161 |

Patrick S. Investor from Indianapolis, Indiana

@Upen Patel What do commercialbroker fees typically run?

Patrick S., Ridgemont Capital Partners

Brian Adams CPA, Adams Investor Group, LLC | 2159671464 |

EXPLORE COMPANY IMPORTANT SOCIAL

Membership About Us Terms of Use Facebook

Community Press Rules Twitter

Education Advertising Privacy Google+

Marketplace Careers FAQ YouTube

2004-2017 BiggerPockets Inc. All Rights Reserved.

Você também pode gostar