What are my options if I own a building with about 710 credit rat

Question

I own a building free and clear and I'm interested in a second building. The first building was inherited and is under my name, it should assess at 1.5 mil based on comparables. I have a full time job as a nurse and cred score is a little low at 710. I'm a first time buyer and I'm interested in a building. I was wondering before I go to the bank to get more approved what are some of my options for getting a loan of 1.3 million considering my situation.

Shmuel Harris · Answer

@Kevin Lee

Welcome to the BP community.

Plenty of great resources here.

@Eric Schleif will correct me if I am wrong, but you need to decide on a few things before moving forward. You will need to know how much you are planning on putting down. This will lower the mortgage amount, potentially making it more possible for you to secure a loan. Being approved for a loan will also depend on your current income. Working and owning a 6 unit property should bring you into the range that a broker will need to be able to secure you a loan. Obviously, it will depend on the numbers.

Also, as an aside.

Why would you be interested in going into a property that will provide negative cash flow? I ask because with the right down payment it is possible to find properties here in Bedstuy that will provide positive cash flow from the get go....

Some things to think about.

Let me know if I can help out.

Eric Schleif · Answer

@Shmuel Harris Yes Kevin should be able to get a loan. You'd just underwrite a commercial loan to the NOI of the 6 unit building he currently owns. It's not as dependent on personal income but there are certainly other factors to the underwriting. I sent him a PM to get some more information. I highly doubt a 3 resi unit above a retail store fully rented in Brooklyn has a negative NOI.

Kevin, if you want to send me the numbers I'd be happy to take a look.

Kevin Lee · Answer

@Shmuel Harris really appreciate the insight, will have to look around more. This would be my first investment and I was thinking if I could hold tight for 8 years I'd be making money along with potential appreciation but you're right, I might need to rethink the negative cash flow

Kevin Lee · Answer

Yeah, would that make a different in loan terms?

Eric Schleif · Answer

Where are both properties located? Brooklyn?

Kevin Lee · Answer

I have a 6 apartment residential and I'm trying to buy a 3 apartment and 1 commercial. The purchase would be negative cash flow at the moment but it'll be positive in 8 years when the lease for the commercial space is up. I'm trying to think of some way to make the cash flow positive. If I borrow against my building will there be a lower rate?

Brad Stuteville · Answer

You shouldn't have an issue on a collateral standpoint if you pledge both it should keep you from putting any cash down.  Deciding factor will likely be cash flow.  You will need to show that you can either support the new payment out of your existing income, or come up with a really good proforma.

What are my options if I own a building with about 710 credit rat

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