multi family lenders for out of state deals
I am looking to purchase a 20 unit deal out of state. I currently live in CA, but looking to invest in a different state. Other than speaking with a mortgage broker, almost all the local lenders (commercial) mentioned they would have a hard time providing me with a loan of this type to an out of state investor. Most only offered me a loan for 1-4 units.
I do not understand how other folks on Bigger pockets mention they purchase MF deals in different states.
Any suggestions.
Great question, I believe local lenders may have restrictions that prevent them from lending out of state. Your best bet for investing out of state is finding a lender online that you could connect with. I have a couple recommendation's if you'd like. They do 5+ unit commercial loans so it should work for you.
Other options would be private money or some kind of crowdfunding/syndication.
There are 2 ways to go.
Bridge Financing
Usually used for value add properties with under market rent. This gives you the opportunity to acquire the property and get it into a shape where you can get permanent financing. You can also get your rehab financed through this.
Permanent Financing
There are plenty of commercial lenders that will finance the deal out of state but often times they want at least $500k in loan amount. Rate can be comparable to FNMA permanent financing. Main thing is the property occupancy and debt service coverage ratio often time needing 1.2-1.25. The most important thing in purchasing a multi family deal is the property itself along with your personal financials. Personal income not so much. I'm in Cali but we've financed FL, TX, OH no problem.
My clients and I personally do MF deals often without any problem with securing out-of-state financing (meaning it is out of the buyer's residence state - but in the state where the property is located). What we are encountering includes:
1. If you haven't managed/had a successful track record with a MF/Apartment in the past, commercial residential lenders aren't interested.
2. We have been told that the appetite for commercial residential is limited/greatly decreased as the investment interest has waned. That is not the case with up to 4 unit properties where lending is still robust.
I recommend finding the property first and then making a case for why it is a good risk: your experience, cash flow, liquidity. Also, build your bench strength by having a commercial realtor/broker on your side; not only can they help find the property, they can assist in providing resources - including lenders.
Best...
Quote from @Dalton King:
Great question, I believe local lenders may have restrictions that prevent them from lending out of state. Your best bet for investing out of state is finding a lender online that you could connect with. I have a couple recommendation's if you'd like. They do 5+ unit commercial loans so it should work for you.
Other options would be private money or some kind of crowdfunding/syndication.
Thank you ! Yes if you can provide those recommendations that would be wonderful !
Never encountered this. I help first time investors purchase larger multifamily properties out of their home state all the time... no lender has ever questioned it to me.
Why do you not want to talk to a mortgage broker? Any commercial mortgage broker will have easy access to help you find what you are looking for and often at better costs and with more ease.
Sounds to me like you are asking the wrong lenders or looking in the wrong places. Brokers are a great resource to help folks out who are having trouble such as what you are now.
Cheers!
Quote from @Patricia Steiner:
My clients and I personally do MF deals often without any problem with securing out-of-state financing (meaning it is out of the buyer's residence state - but in the state where the property is located). What we are encountering includes:
1. If you haven't managed/had a successful track record with a MF/Apartment in the past, commercial residential lenders aren't interested.
2. We have been told that the appetite for commercial residential is limited/greatly decreased as the investment interest has waned. That is not the case with up to 4 unit properties where lending is still robust.
I recommend finding the property first and then making a case for why it is a good risk: your experience, cash flow, liquidity. Also, build your bench strength by having a commercial realtor/broker on your side; not only can they help find the property, they can assist in providing resources - including lenders.
Best...
Thank you Patricia that was helpful
If you're looking out of your primary state, I'm assuming you're also going to have the property managed by a company - I'd lean into your property management company and ask for their list of lenders and potentially any out of state investors they manage for.
I do all of my investing out of my primary state and got a list of lenders from my property manager on the first purchase and have used the same lender for the rest of my purchases after.
Just another way to use your network!
Quote from @Dalton King:
Great question, I believe local lenders may have restrictions that prevent them from lending out of state. Your best bet for investing out of state is finding a lender online that you could connect with. I have a couple recommendation's if you'd like. They do 5+ unit commercial loans so it should work for you.
Other options would be private money or some kind of crowdfunding/syndication.
@Dalton King Thanks for the information. If you can send me your recommendations that would be great !
Quote from @Zach Scherschel:
If you're looking out of your primary state, I'm assuming you're also going to have the property managed by a company - I'd lean into your property management company and ask for their list of lenders and potentially any out of state investors they manage for.
I do all of my investing out of my primary state and got a list of lenders from my property manager on the first purchase and have used the same lender for the rest of my purchases after.
Just another way to use your network!
@Zach Scherschel that is a great idea ! Thank you for sharing !
Quote from @Nick Belsky:
Never encountered this. I help first time investors purchase larger multifamily properties out of their home state all the time... no lender has ever questioned it to me.
Why do you not want to talk to a mortgage broker? Any commercial mortgage broker will have easy access to help you find what you are looking for and often at better costs and with more ease.
Sounds to me like you are asking the wrong lenders or looking in the wrong places. Brokers are a great resource to help folks out who are having trouble such as what you are now.
Cheers!
@Nick Belsky Maybe we can work together :)
Quote from @Young Ho Yoo:
There are 2 ways to go.
Bridge Financing
Usually used for value add properties with under market rent. This gives you the opportunity to acquire the property and get it into a shape where you can get permanent financing. You can also get your rehab financed through this.
Permanent Financing
There are plenty of commercial lenders that will finance the deal out of state but often times they want at least $500k in loan amount. Rate can be comparable to FNMA permanent financing. Main thing is the property occupancy and debt service coverage ratio often time needing 1.2-1.25. The most important thing in purchasing a multi family deal is the property itself along with your personal financials. Personal income not so much. I'm in Cali but we've financed FL, TX, OH no problem.
@Young Ho Yoo thank you for this information.
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Have you tried a commercial mortgage broker ? I got pre-approval quickly.
@Diva Rescia - a good broker can find options for you. Besides the usual things the lender will want to see, they will also want to see that you are an experienced investor and that you have a property management company set up for the property.
Quote from @Carlos Ptriawan:
Have you tried a commercial mortgage broker ? I got pre-approval quickly.
@Carlos Ptriawan I will check that out thank you
Quote from @Ryan O'Mara:
@Diva Rescia - a good broker can find options for you. Besides the usual things the lender will want to see, they will also want to see that you are an experienced investor and that you have a property management company set up for the property.
@Ryan O'Mara perfect thanks for sharing this !
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#2 Managing Your Property Contributor
- Property Manager
- Royal Oak, MI
@Diva Rescia appears you are only speaking with residential lenders. Try commercial lenders.
Level Up Capital, Lynk Capital, Lima One Capital, etc
@Diva Rescia
A lot of Commercial lenders I know in Columbus OH will not lend to out-of-state clients. We have found some that will if they can see you already own a small multi-family in that market and that you have operational experience owning Multi-family. As for the comment on online lenders, I would stay away from using out-of-state lenders or online lenders to buy anything let alone 5+ units. The reasoning being they don't know that market and they always have problems. For example 35 days into a 55-day contract, an out-of-state lender still couldn't order an appraisal. We switched lenders and a commercial guy I work with a lot here in Columbus had the appraisal ordered in 5 days and back to us in a week. As well as a lot of out-of-state lenders flagging stuff like a small amount of water in a basement. Most local lenders will look at it and it won't be a problem.
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Quote from @Patrick Drury:
@Diva Rescia
A lot of Commercial lenders I know in Columbus OH will not lend to out-of-state clients. We have found some that will if they can see you already own a small multi-family in that market and that you have operational experience owning Multi-family. As for the comment on online lenders, I would stay away from using out-of-state lenders or online lenders to buy anything let alone 5+ units. The reasoning being they don't know that market and they always have problems. For example 35 days into a 55-day contract, an out-of-state lender still couldn't order an appraisal. We switched lenders and a commercial guy I work with a lot here in Columbus had the appraisal ordered in 5 days and back to us in a week. As well as a lot of out-of-state lenders flagging stuff like a small amount of water in a basement. Most local lenders will look at it and it won't be a problem.
@Patrick Drury thank you very much for this helpful information !!!
Quote from @Diva Rescia:
I am looking to purchase a 20 unit deal out of state. I currently live in CA, but looking to invest in a different state. Other than speaking with a mortgage broker, almost all the local lenders (commercial) mentioned they would have a hard time providing me with a loan of this type to an out of state investor. Most only offered me a loan for 1-4 units.
I do not understand how other folks on Bigger pockets mention they purchase MF deals in different states.
Any suggestions.
I can recommend some commercial lenders to you that will lend to you in Ohio as an out of state investor
Yes, i faced a similar situation. Most local banks/ credit unions do not lend to out of state buyers, due to their rules about buyer's residency.
If you are investing in NC, i have a lender reference that can work for your situation. Stating the obvious, Mortgage Brokers will have additional fees in terms of origination points compared to direct bank lenders.
@Diva Rescia Which state are you buying a 20 unit in?
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Real Estate Agent OH (#2020004900)
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@Scott Allen ohio, texas, florida, nevada, arizona, tenesse,