Getting Pre-Approved and making offers on Multi family Apartments - 4-12 units

Multi-Family and Apartment Investing
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Getting Pre-Approved and making offers on Multi family Apartments - 4-12 units

Will F.
Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes

Hey gang,


So I was wondering about the process for making offers on Multi-Family apartments.

I've had experience with purchasing small office and 1-4 unit properties in past.

I was wondering what the process is for getting Pre-Approved and submitting offers for 5-15 unit apartments.

1. Do you usually get a commercial RE agent first? or do you make offers direct?

2. What is process for pre-approval, do you just go to the Big banks and get pre approved similar to small residential loans?

3. Where are some places you find deals? I've been looking at MLS and Loopnet only. Anyone make direct offers to investors or anything creative to get a deal?

4. As far as representation, do you have your agent make offers or do you go directly to the selling commercial agent? (i'm guessing a lot will pocket list and want to get duel-representation to get a larger commission? )

Thanks in advance

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Michael BlankPro Member
Rental Property Investor · Atlanta GA · Member since 2013 · 85 posts · 82 votes
12y

Local banks are definitely way to go for smaller deal sizes. You won't get "pre-approved" for commercial property as you do for residential property but you should establish relationship with a handful of lenders. Before I got my first property, I created a fictitious deal package and used that when meeting lenders. I used the meeting to give them a chance to know me better and do some light underwriting of the kind of deal I was looking for. I also wanted to better understand their requirements and the potential terms I could get. I also want to understand what they want in a loan package.

I do this all upfront.

Then, when you have a property under contract, the lender already knows you, and you can create a loan application package that he's looking for. The result of all of this upfront work is that you'll be able to get your loan faster when the clock's ticking.

Hope that helps!

Michael

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    12y

    Hi Will,

    Loan available will vary based on loan size.

    For instance 15 units at 20k each is 300,000 purchase price. At 20% down you are looking at about a 240,000 loan. In the commercial space that is very, very small. Usually a local or regional bank likes that business.

    If you had 15 units at 100,000 apiece purchase you are at 1,500,000 price. Take away 20% and you are at about 1,200,000 price. Anything above 1 million loan amount the avenues start opening up in commercial for lending options. It's kind of like a 50k house in residential hardly anyone wants to spend time on to fund as a mortgage broker because lot of work for very little pay. Same thing with commercial for anything under 1 million although some lenders cut off is 500k.

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  • Wade Sikkink
    Real Estate Investor · Lincoln, NE · Member since 2013 · 584 posts · 353 votes
    12y

    I agree with Joel. Local or state banks are the ones that will likely want to play ball on deals this size. We just bought a 14 plex for $335k. I have a relationship with my local banker for another business I own, so he gave me the go ahead to make the offer after showing him the numbers. I dealt directly with the sellers agent.

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  • Michael BlankPro Member
    Rental Property Investor · Atlanta GA · Member since 2013 · 85 posts · 82 votes
    12y

    Local banks are definitely way to go for smaller deal sizes. You won't get "pre-approved" for commercial property as you do for residential property but you should establish relationship with a handful of lenders. Before I got my first property, I created a fictitious deal package and used that when meeting lenders. I used the meeting to give them a chance to know me better and do some light underwriting of the kind of deal I was looking for. I also wanted to better understand their requirements and the potential terms I could get. I also want to understand what they want in a loan package.

    I do this all upfront.

    Then, when you have a property under contract, the lender already knows you, and you can create a loan application package that he's looking for. The result of all of this upfront work is that you'll be able to get your loan faster when the clock's ticking.

    Hope that helps!

    Michael

    Podcast Guest on Show #324
    1Reply
  • Michael BlankPro Member
    Rental Property Investor · Atlanta GA · Member since 2013 · 85 posts · 82 votes
    12y

    I forgot to respond to the other part of your question: WRT making offers, I have found it is very rare that a commercial real estate agent is out there making offers for you. They typically represent the seller. As a result, you’re usually the one either contacting the seller’s agent or the seller directly.

    While there are many different ways you can get deals (direct mail, networking, probate, auctions, etc), I have found that most deals come from good commercial real estate agents. I would focus on building trust with 2-5 agents who will feed you good, often off-market deals.

    Michael

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