Hello BP I am wondering how someone qualifies for a multi family (10-12 unit)commercial loan without prior experience. I have heard all the success stories of people’s first purchase of 20, 40, 50 units but wondering, how they qualified? I have owned multiple SFR but all primary residence. Any pointers and direction is greatly appreciated. Thanks

@Ashly Frasso Not to sound weird but I had some money for a down payment, a 27-unit apartment came on the market that I liked, and I asked. But I’ll be honest, I didn’t know if I would qualify.

What they liked (or so they told me) was that the property penciled out well and I penciled out well. I wasn’t going to live off of the proceeds of the apartments, I could afford (of the poop hit the fan) to come out-of-pocket to cover the mortgage if I had to, etc. So the fancier way of saying it would be the DSCR worked for them and my net worth was greater than the loan balance. Oh the glorious fun of full-records loans.

It doesn’t hurt that my PM had worked with the bank before (for other clients) that it was a local bank that could drive by the property in question, etc. And they really wanted to dive into my connection to the area.

Now do I know how much weight a loan committee put on each of those contributing factors? Not really. I don’t think it was a “by the skin of my teeth” approval but you never know.

@Ashly Frasso Commercial loans will largely depend on the performance of the asset, rather than your personal financials.  If the property is performing, then as @Andrew Johnson said, then you will just need to show enough income / reserves to cover the balance.  You will most likely be putting any other real estate assets you own under potential for recourse.