BiggerPockets

I am probably the 1,000,000nth person who has probably asked this question. In terms of seeking financing on larger investment properties above $1 mill, what are the most successful investors doing to secure those loans? How relevant is one's personal credit in securing big deals?

Personal credit is very relevant for residential investments (1-4 units) and less relevant for commercial investments (but still a factor a lot of lenders).

Regards,

Scott Miller

Based on the property. Buildings like that are valued based on the income they produce. The lender will look at the income produced by the property vs. the payments on your loan. This ratio is the " debt service coverage ratio" or DSCR or DCR. They look at NOI (net operating income) divided by the proposed payment. Different lenders have different guidelines, but they will typically want this ratio to be 1.2 or 1.3 or higher. So, if the payment is $10,000 a month, and the NOI (total rent, less vacancies, less all expenses but not less the payment) is $12,000 a month, they will be satisified the property can support the loan. Fairly large down payments, 20%+ are the norm. Seller seconds are usually allowed, and lower down payments are possible, but these things will raise your interest rate. Reserves will be required, too. No cash deals are possible, but would typically involve raising money for the down payment separately, or borrowing against another property.

Jon