Berkeley, CA · Member since 2015 · 3 posts · 1 vote
Hi,
I'm a college student doing a project for a real-estate class, and I need a professional opinion on the following property, and information about what types of loans/rates I could obtain for this purchase.
Hopefully you will be traveling the world like mein a few years when you make all your money on real estate ;) By the time you're graduating, the market should be soft again! Wait for the dips!
Normally, you would be able to get a 75% Loan to Value (LTV) loan on a multifamily building. However, for this property by beautiful Lake Merritt, under rent control, it will not generate enough income to support a 75% LTV. Lenders generally want about 1.15X Debt Service Coverage Ratio (DSCR) right now for multifamily. Possibly 1.20X in Oakland. That means the net income from the property needs to be about 115% of, or 1.15X the annual debt service. To find the net income, use about 40% of the revenue as expenses, or look at the marketing sheet for the property and calculate it by that. Try both. Probably a 25yr amortization, variable rate around prime rate (depending on your well-heeled sponsor), fixed rate for a few years, 5, 10 or 15yr maturity, and prepayment penalties. You can look up all these terms for basic commercial multifamily loans.
The best thing to do would be to contact the listing agent on the bottom of the listing link you provided, and ask them what kind of financing they can get. They will already have an idea of the rate, amortization, and monthly payment, and you can use that to calculate the net income and DSCR for various loan sizes. Or ask what LTV it would support (calculating yourself will "learn you" more..