Advice needed

11 Replies

Hello everyone. 

I am 27 currently a student. I want to own an apartment complex in the near future.   I am really determined and I am already working towards it.  

I have been making a lot of research in buying or building an apartment but apparently I will be more interested in buying an apartment complex . My questions are :

What is the minimum credit score I need to have to be able to get a loan 

What is the minimum down payment I need to have if I intend to buy an apartment of les than a million dollar 

any other information will be helpful as factors that affect buying/owing an apartment. I have started saving and I intend to start this project in 2-3 years. Please help as I will be asking more questions. 

Best of luck to you with your investing business @Adedamola Haastrup . As far as credit score it varies based on the bank and their lending requirements. Fannie Mae I believe has a specific minimum for owner occupied but I'm not sure what it is. At least 680 is a safe bet I would say although with enough cash and income you may work with a local lender that can allow a lower score. I always say stick with local lenders who look beyond the credit score. You will have to have at least 25% down for any commercial deal (more than four units) Less with four or fewer unit properties. Price of the property has no bearing on the percentage you have to put down it's based on number of units. 

@Adedamola Haastrup

It sounds like creative financing is the topic you should be researching.  You will be able to learn how to raise the cash you are going to need to make your purchase.  You can also forget about building an apartment complex.  To convince any lender to lend an inexperienced investor the amount of capital you are going to need to fund the purchase of land and cost to build, add in the extra time that you will need as a first timer dealing with building and zoning departments, additional costs for engineering, etc., then explaining that you want to use their money essentially to learn as you go just isn't going to happen imo.  

I like your ambition, and I think you should go for the purchase which is very attainable/realistic.  Good luck with your research.

Please give me example of local lenders and the maximum amount they can lend me based on my credit score and my %25 down payment @Rob Beland I am in Houston Texas.   Can you or anyone please breakdown the % of fees to be paid monthly including the management fees and mortgage fees once I acquire an apartment complex .   I just need an example. Do I need to have a personal lawyer and does my company has to be a corporation or llc.  

@Steven G.   Thank you. are u saying that I need to have a lot of money as an inexperienced investor. 

@Adedamola Haastrup

If you plan on building then yes either your own money or a private lender.  If you are buying a commercial property such as an apartment complex for around $1Million then you are going to need $250k for the down payment which I think you already know, so I'm not really sure what it is that you are asking here?

@Steven G.

Thank you , I only have $50000 now.  Hoping to buy about 5unit apartment that's well maintained.  Hopefully I can get a local lender with my credit score.  Also can you please give me example of local lenders and the maximum amount they can lend me based on my credit score and my current down payment that I have.I am in Houston Texas. Can you or anyone please breakdown the % of fees to be paid monthly including the management fees and mortgage fees once I acquire an apartment complex . I just need an example. Do I need to have a personal lawyer and does my company has to be a corporation or llc.

@Adedamola Haastrup

That info you have to find out yourself, pick up your phone and call. If you don't like to talk on the phone then just Google local PM and banks you should be able to find all the info you are looking for.

If you want to invest in apartment in a better way then this site would help you out on that.

Best of luck

@James Clark

I am open to learn.  What better way do you have.   Please advice.  On investing in an apartment based on my questions.  

Thank you 

I am planning to buy an apartment that is less than 500000. Minimum of 5 units. 

Current I have $50000 and credit score 680

My questions are here again 

I understand I need %25 down payment 

After buying. Do I change the management company 

What are the bills I pay monthly on the apartment , please break down

When does the mortgage payment starts

If apartment needs renovation.  Do I get the money off the lender or it has to be my personal money 

Thanks everyone 

@Adedamola Haastrup

First I'll try to answer some of your questions in regards to fees and maintenance:

Most property management companies that I hear investors using charge 10% of the gross rental income, but that can vary from company to company.  

You ask after buying "Do you change the management company?"  I don't understand this question because you had no management company before, so who would you be changing to?

The bills that you are going to pay monthly: Mortgage,Taxes,Utilities,Property management,etc.  Each property is different so nobody can give you exact numbers.  Also look up some other threads that discuss this exact topic because they will give you a better idea than I can.

The mortgage starts after the closing.

The last question regarding renovations is the most important.  I understand that you have become interested in adding an apartment complex to your portfolio, however there is an important factor that you may or may not be aware of and that is the fact that real estate becomes commercial once there is more than four units in the deal.  This is going to have an effect on you in several different ways.  By going the commercial real estate route you will be ineligible for some special financing programs that would be available to you if you buy a residential Quadplex(four units in one building).

These financing programs such as FHA give homebuyers the opportunity to purchase a duplex(2 units), triplex(3 units), or Quadplex(4 units) for as low as 3.5% down payment which will free up some capital for you to do other deals and get you into real estate investing right now as oppose to saving for a 25% downpayment on an apartment complex that would be commercial real estate. Also Google the term "house hacking".

I don't want to deter you from achieving your goals, but I believe that you would be an excellent candidate to consider these FHA loans. To further answer your question as to wether you can mortgage the money needed to renovate: An FHA 203k loan is designed to do exactly that(this style loan will not be available to you in commercial real estate).

I hope this information helps you and I wish you the best of luck!!

@Steven G.

I am so happy to always read from you. You really have been able to make me understand alot better about my plans to owning an apartment. I will start looking out for 4 unit apartment to enable me qualify for the FHA loans with a Down payment of 3.5%

What is the % of my monthly fees on mortgage , taxes  and utilities if the apartment cost about $300000 and if the monthly rent of the 4units apartment is $3000  since I already know that %10 of the gross income go to the property management monthly and again. Please give me a range of the closing fees. 

The reason why I asked about changing the management company is. I believe I will meet the old management company there before and during buying. So I may have to change the management  company to my own choice. 

At what time would you say I qualify to buy a commercial apartment after owning a 4 unit apartment.  What is the highest age of apartment that you would advise me to buy. 

I was thinking of buying a land, like an acre or more. Do you advice this kind of investment and how could I benefit from it apart from reselling later.

With my 50k now do you advice me buying a 4 unit apartment via the FHA loan. And how long would you advice I keep the apartment before reselling.

And lastly , after owning a 4 unit apartment via the FHA loan , how soon can I buy another 4 unit apartment via the FHA loan that will qualify me to put down the same 3.5%

Thank you so much 

With this information. I believe I will be ready to start

@Adedamola Haastrup

I'm glad that I'm able to help out, however make sure you also do your own due diligence by obtaining information from as many sources as you can find.

When you say % of monthly fees on the mortgage I assume that you are referring to PITI or PMI. For this information you will have to contact your financial institution.

Taxes vary so greatly from each area, so I will not be able to answer this question.  There are fourplex homes that have property and school taxes of $25k per year and ones that have these taxes at $1k per year.  The utility question also cannot be answered accurately.  The best way to estimate utility cost is by obtaining old utility bills of the property that you are interested in buying.

Closing fees vary from one institution to another, but I would assume between $5k-$10k.

You will be qualified once you obtain much more experience & knowledge.  Giving you a time frame is pointless because some people learn faster than others.

I like to build and renovate so age is not a restriction when purchasing.  For those that don't have this knowledge I would stay away from buildings that appear to have structural issues.

I do not have much knowledge on the topic of buying and selling land.

I'm not advising you to do anything.  I'm just answering some questions for you to enable you to make a more informed decision.  Also be sure to research anything that you hear on this site personally.

The FHA guidelines state that in order to qualify one must be an owner occupant for at least one year. Go to their website just Google FHA loans.

Keep scrolling through the forms and do some research on your own to get informed. After reading this post I would expect a serious investor to know the FHA guidelines like the back of their hand within an hour.

Good Luck  

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