CRE investing for a newbie

Investor · Charlotte, NC · Member since 2023 · 11 posts · 7 votes

Can a investor with no experience get a Non recourse Agency loan for 10-20 units in NC or SC area ? Or will i need a experienced partner to cosign ? Can the equity portion be funded as well, provided i have at least 10 % liquid ?

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Garret Rumbea

Inland Empire, CA · Member since 2017 · 151 posts · 79 votes

10mo

From my experience you'll need to check all three boxes: net worth, liquidity, and experience (owning certain number of doors for past 2 years I believe). But you should definitely speak with your lender for their criteria.

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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
10mo
No. You should be building your relationship with your lender. They should tell you what is needed.
Is there an underlying issue you have that creates this question? Let’s start from there.
0 Reply
- Rabin Bista
  OP
  Investor · Charlotte, NC · Member since 2023 · 11 posts · 7 votes
  10mo
  Quote from @Henry Clark:
  
  No. You should be building your relationship with your lender. They should tell you what is needed.
  Is there an underlying issue you have that creates this question? Let’s start from there.
  
  Henry, thanks for the reply. I don't have any underlying issue. I am just looking for my first multifamily , so want to know few things before jumping in .
  0 Reply
Charles Seaman
Apartment Syndicator · Charleston, SC · Member since 2017 · 519 posts · 631 votes
10mo
@Rabin Bista You will typically need an experienced partner to qualify for a non-recourse agency loan, however there are times when agency lenders will make exceptions if the sponsor has strong financial strength. The equity won't count towards the liquidity, so you'll need to have adequate liquidity prior to the closing and you'll be expected to maintain it through the loan term.
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- Rabin Bista
  OP
  Investor · Charlotte, NC · Member since 2023 · 11 posts · 7 votes
  10mo
  Quote from @Charles Seaman:
  
  @Rabin Bista You will typically need an experienced partner to qualify for a non-recourse agency loan, however there are times when agency lenders will make exceptions if the sponsor has strong financial strength. The equity won't count towards the liquidity, so you'll need to have adequate liquidity prior to the closing and you'll be expected to maintain it through the loan term.
  Charles, thanks for the reply .
  1 Reply
Garret Rumbea
Inland Empire, CA · Member since 2017 · 151 posts · 79 votes
10mo
From my experience you'll need to check all three boxes: net worth, liquidity, and experience (owning certain number of doors for past 2 years I believe). But you should definitely speak with your lender for their criteria.
1 Reply
- Rabin Bista
  OP
  Investor · Charlotte, NC · Member since 2023 · 11 posts · 7 votes
  10mo
  Quote from @Garret Rumbea:
  
  From my experience you'll need to check all three boxes: net worth, liquidity, and experience (owning certain number of doors for past 2 years I believe). But you should definitely speak with your lender for their criteria.
  
  Got it
  0 Reply
Greg Kasmer
Rental Property Investor · Philadelphia, PA · Member since 2021 · 778 posts · 504 votes
10mo
@Rabin Bista - The "rule of thumb" for agency loans are: 1) Net worth equal (or greater) to the size of the loan, 2) At least 2 years experience in multifamily as a GP, and 3) Liquidity of 10% of loan amount AFTER all expense, etc... are paid for the loan. The above are just guidelines to start the conversation with the lender - And, as others have said, they might vary and/or have more requirements. Good Luck!
1 Reply
- Rabin Bista
  OP
  Investor · Charlotte, NC · Member since 2023 · 11 posts · 7 votes
  10mo
  Quote from @Greg Kasmer:
  
  @Rabin Bista - The "rule of thumb" for agency loans are: 1) Net worth equal (or greater) to the size of the loan, 2) At least 2 years experience in multifamily as a GP, and 3) Liquidity of 10% of loan amount AFTER all expense, etc... are paid for the loan. The above are just guidelines to start the conversation with the lender - And, as others have said, they might vary and/or have more requirements. Good Luck!
  
  thank you. this is helpful.
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Arman AhmedPro Member
Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 957 votes
10mo
@Rabin Bista
Rabin, I don’t have direct experience with NC or SC loans, but the Midwest offers some great opportunities for 10–20 unit multifamily investments with strong cash flow and lower entry costs. Many out-of-state investors start here, and you can often structure deals with smaller down payments while still achieving good returns.

[email protected]614-418-6081
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- Rabin Bista
  OP
  Investor · Charlotte, NC · Member since 2023 · 11 posts · 7 votes
  10mo
  Quote from @Arman Ahmed:
  
  @Rabin Bista
  Rabin, I don’t have direct experience with NC or SC loans, but the Midwest offers some great opportunities for 10–20 unit multifamily investments with strong cash flow and lower entry costs. Many out-of-state investors start here, and you can often structure deals with smaller down payments while still achieving good returns.
  
  Arman, good to know this . I would like to be in touch with you .
  0 Reply
Nick BelskyBusiness Member
Lender · Orlando, FL · Member since 2021 · 1k+ posts · 704 votes
10mo
@Rabin Bista
No. We do quite a bit of SBL/SML loans. Certain criteria needs to be met by the borrower and the collateral as a litmus test to even be evaluated for terms:
Borrower - NET Worth of at least 120% of the proposed loan amount
Borrower - Reserves of at least 9 months PITIA after down payment and fees
Borrower - Direct experience with similar property type for at least 5 years (some exceptions are made for 3 years of experience or if mixed with 1-4, CRE properties)
Collateral - 90% Occupancy with 90% Rent Collection for the past 3 months, preferably 6 months. UW will review the full T-12 to look for trends or dips. Anything under 90% will be heavily scrutinized. Min DSCR is 1.25 based on average NOI, not PITIA. Both programs have "hits" based on the scenario where that minimum may increase.
Collateral - must be in good condition, no outstanding repairs, open litigation, any renovation/improvements must be well documented, etc... SML has minimum sqft requirements, mixed use restrictions, etc... SBL allows some things SML won't and vice-versa.
Collateral - if borrower is not local to the property, both agencies require a well-vetted property management company, subject to approval.
These programs are amazing for the right borrowers and collateral, but not a good fit for all. We are seeing 75/80LTV loans in the 5's right now at par pricing. What most borrowers don't realize is that with these loans comes quite a bit of reporting to GSEs. If collections/occupancy fall below 90%, they will jump all over you to remedy and find out what's going on. There is also a significant expense many borrowers take on to keep up with the intense reporting to maintain the loans. I have a few clients that have specifically asked to refi out of Agency loans to save on these reporting costs and the pains of regularly being quizzed by the agencies.
Being new to MF+, you are better off checking with a local bank or credit union whom may be willing to work with you. Their rates have been in the 6-8% range, with varying leverages from what I've seen. The DSCR channels are 30 year fixed loans but are recourse, lower leverages, and typically 7-9% range.
Cheers!
[email protected]
Belsky Mortgage, LLC522 Reviews
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- Rabin Bista
  OP
  Investor · Charlotte, NC · Member since 2023 · 11 posts · 7 votes
  10mo
  Quote from @Nick Belsky:
  
  @Rabin Bista
  No. We do quite a bit of SBL/SML loans. Certain criteria needs to be met by the borrower and the collateral as a litmus test to even be evaluated for terms:
  Borrower - NET Worth of at least 120% of the proposed loan amount
  Borrower - Reserves of at least 9 months PITIA after down payment and fees
  Borrower - Direct experience with similar property type for at least 5 years (some exceptions are made for 3 years of experience or if mixed with 1-4, CRE properties)
  Collateral - 90% Occupancy with 90% Rent Collection for the past 3 months, preferably 6 months. UW will review the full T-12 to look for trends or dips. Anything under 90% will be heavily scrutinized. Min DSCR is 1.25 based on average NOI, not PITIA. Both programs have "hits" based on the scenario where that minimum may increase.
  Collateral - must be in good condition, no outstanding repairs, open litigation, any renovation/improvements must be well documented, etc... SML has minimum sqft requirements, mixed use restrictions, etc... SBL allows some things SML won't and vice-versa.
  Collateral - if borrower is not local to the property, both agencies require a well-vetted property management company, subject to approval.
  These programs are amazing for the right borrowers and collateral, but not a good fit for all. We are seeing 75/80LTV loans in the 5's right now at par pricing. What most borrowers don't realize is that with these loans comes quite a bit of reporting to GSEs. If collections/occupancy fall below 90%, they will jump all over you to remedy and find out what's going on. There is also a significant expense many borrowers take on to keep up with the intense reporting to maintain the loans. I have a few clients that have specifically asked to refi out of Agency loans to save on these reporting costs and the pains of regularly being quizzed by the agencies.
  Being new to MF+, you are better off checking with a local bank or credit union whom may be willing to work with you. Their rates have been in the 6-8% range, with varying leverages from what I've seen. The DSCR channels are 30 year fixed loans but are recourse, lower leverages, and typically 7-9% range.
  Cheers!T
  Thank you for taking time to give detailed explanation. This is very informative.
  1 Reply
Kerlous TadresBusiness Member
Realtor · Columbus, OH · Member since 2023 · 1k+ posts · 1k+ votes
10mo
You’ll almost always need an experienced partner or guarantor for agency debt on your first 10–20 units. Most new investors start with local banks or partner with someone who brings track record, then refi into agency once they prove performance.
[email protected]614-490-1163
Kerlous Tadres | Reafco Real Estate541 Reviews
Website View Page
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- Rabin Bista
  OP
  Investor · Charlotte, NC · Member since 2023 · 11 posts · 7 votes
  10mo
  Quote from @Kerlous Tadres:
  
  You’ll almost always need an experienced partner or guarantor for agency debt on your first 10–20 units. Most new investors start with local banks or partner with someone who brings track record, then refi into agency once they prove performance.
  
  Kerlous, Thank you for your suggestion.
  1 Reply

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