Apartment Building Financing Question!
OK, I am a newbie when it comes to 5+ units. I do own and rent a couple 3 family properties. I am looking at an apartment building in the Boston area for 600K. It has a great return DSCR=2.05 and a cap rate of 14. My problem is down payment! I really want to get into this property! I can manage 5% down. My question is can I have the seller hold a second mortgage on the property for 15%? is this legal, will a londer think this is OK? Is there a better way to do it? should i look for a 90% lender? Please give me some ideas! I am trying my best to get this property before this guys lists it and someone else with money buys it up!
Thanks!
You'll be lucky if you find a lender who will finance more than 80%. the lender may not allowed seller to hold a second. THey want to see you put money in the deal. At least 15%. seller can hod second for 5%.
:-D
Every situation is different and it all boils down to what the numbers say.
Make your case solid, and show how the numbers work inside and out. Add some pretty graphs and charts, go to kinkos, make it look like a nice little package, and go to the bank. Lenders will lend more than 80% but your case has to be solid and your numbers have to favor their terms.
Don't forget about private lenders, the ones that you can find and the ones that you create. Just because a bank will only give you 80% does not mean you will have to stop there. There is private money you can tap into to make this thing work.[ Edited by nebulousd on Date 03/23/2004 ]
Generally, you'll find it very hard to find a bank to do more than 80% on a 1st mortgage on a multifamily.
Even though it appears the property supports itself, I've found one must be a very, very good borrower to get a bank to lend over 80% on the 1st.
We place loans all the time where the combined loan-to-value is above 80%, even up to a CLTV of 95% where the seller takes a second position. Of course, the borrower must be strong and the property must support itself.
I appreciate the comment of the above post, where you must not neglect building a network of private individuals. You've found a wonderful website where you can learn how to do this from very experienced and wide people.
Welcome!
Sorry for the newbie question, but what does CLTV mean?
Thanks,
Ryan
Thank you everyone for your feedback! The property definately supports itself. Let me ask, on commercial 5+ unit mortgages of this sort, is the more important number the property value or the selling price? What I mean is, if the selling price is - lets say 90% of the property value, will the lender lend on the 100% property value or the selling price? Just curious.
I will be posting the particulars of the offer on here and am going to also do a step by step of my entire process for anyone that might like to see everything that happens on this in order to learn from it with me or to just watch me and maybe make reccomendations!
Thanks again everyone!
P.S. CLTV = Combined Loan To Value (I believe)
If all 3 parties agree (you, seller, and lender) you can do just about anything that you want.
Do a search on google for:
(your state) apartment "100% CLTV"
and see what you find. Lenders vary greatly on what they allow for seller carrybacks. If you find one that will allow 95% CLTV, you may be able to get the other 5% from seller concessions.
You could also work out a partnership with the seller or consider a wrap around mortgage if he doesn't have much equity.
CLTV MEANS Combined Loan To Value
If the bank lends you 80% and the seller holds a 15% second.....your CLTV is 95%.
I personally haven't seen a first mortgage LTV above 80% on a 5+ unit multifamily.
1-4 family properties have much different guidelines than 5+ unit.[ Edited by NancyChadwick on Date 04/21/2004 ]
Currently I am doing a research for own purposes. I am looking for commercial lenders who are willint to finance 100%. I know, there are some requirements, like credit score. But the interested thing is, I have found lenders who would do 100% financing.
Eleni
Eleni, on what property types have you found 100% financing by commercial lenders?
Is the 100% all in a 1st mortgage, or is it a combination of some % 1st + seller financing? If so, can you give me an example?