Financing Apartment Buildings
I'm wanting to jump right into the path that will lead me to my long term goal (large apartment complexes). I have found that large down payments are required to purchase apartment complexes. You get the same thing from most banks on SFH's so I want to expand my reality to learn how to creatively finance these larger properties.
I have two properties that I would like to purchase now. You can use these as examples or just give me general advice. I'd appreciate all help!!! THANKS
1. 5 unit apartment building (3-4br,1-3br, 1-2br) $395,000. Seller willing to finance 90% but wants my own money involved or will not finance. ($60,000 loan left)
2. 11 total units (2-4unit, 1-3unit; 10-2br, 1-3br) $500,000. Current loan is $400,000. Seller wants his equity out for another project and not looking to make a profit. He is willing to consider anything.
Keep in mind I want to put less than $5000 into each transaction.
This is not a question of whether these are good investments (they are--two properties in diff areas). This is simply a question of how to finance.
Thanks,
Matthew[ Edited by myfrogger on Date 10/22/2003 ]
Other options would be
Seller wrap around loan
Having a second put on the property and do a refinance to buy out the first.
Assume mortgage payments and get a secondary loan to pay off the initial owner
Change existing renters into owners by switching to condo's and getting down payments to fund loan acquisition.
Set up lease to own on all and use existing and new down payments as collateral as they would not be refundable.
Get a construction loan and add on to the properties, the loan would not be payable until construction is complete.
If your credit is good enough try a 100% NOO loan, available through the TCI Lenders.
Have the current owner pay the down payment and add it to the final sale amount.
Or sell your body parts to science, after all you dont really need that spleen do you?
I am out of ideas at this point. If you could give me more detail I may be able to come up with more.
Good Luck,
Kyle
You could do cross collateralization with other properties you currently have to equal the monies needed in. Or you could wholesale the properties out (sell it before you buy it). There are Private money loans but most of them want some of your money on the table to share the risk factor, you may be able to work something else of yours to share the risk. There is also secondary financing you could do, but the cost would be very high on the second loan. Or find a money partner , someone that wil put up the cash and split the profits with you 50/50. My best advice is to get creative, but standard lenders will want some out of pocket cash to show that yyou are willing to share the risk.
Good Luck,
Kyle
I appreciate the advise but I knew all of that. Any other ideas?
To be honest...you are asking for allot for a little. I know allot about this subject and there is allot to answering your question properly. Here is a short answer, if you want more information contact me and I will provide greater details.
Conventional lenders require 20% down for 5+ residential / commercial loans as required by Fannie Mae. If you want to put down less, then the lender can no longer sell it to Fannie Mae. They will have to sell your loan to a portfolio investor or keep it for themselves. Some lenders are very stingy about what they will do if they keep it, while others are very flexible so long as the deal makes sense.
I have one lender who will do 100% NOO 1-4 unit (6 months PITI reserves required), another will do 75% with 15% seller carry back for a combined loan to value of 90% for 5+ residential / commercial loans (basically 10% down is very good for large properties) and another who will 100% 5+ residential / commercial loans for properties that you can purchase and renovate / re-lease for 75/80% of the “FAIR MARKET VALUE” ($3Million Min). These are all strong established lenders. If you would like to find out more, please contact me and we can talk.
Respectfully,
Phil
Phillip Herrejon
312.375.7132