I just found out that part of the requirement to get a commercial loan for an apartment complex is to have a minimum of 5 years experience managing a large multi-family property, or something similar. Is this requirement set in stone, or would lenders at a bank ignore this requirement? I prefer to get a loan from a bank, not from a hard money lender.
I don't have experience managing a property, but my investing partner has some experience managing a 2 bedroom house that he rents.
I don't know the answer to this question for your area. However, MF (especially large MF) is waaaaaaaaaaaaay different than SF. I'd say your partner doesn't have any experience either. I know some guys who did very well starting out in MF, so I'm not saying it can't be done, but make sure you know what you are getting into. It's easy to get out of a SF deal. It takes a little more effort to find someone to take over a mess of a MF (without taking an even bigger loss).
I am from Massachusetts.
In general, lenders are expecting an investor to graduate from a few units to a small commercial multi or mixed use and then to larger commercial purchases. The reality is that even if you use a property manager or on-site management, there are so many mistakes that you can and will make along the way, that they want you to learn on a smaller scale before you graduate.
You have to learn arithmetic and algebra before you take on calculus.
If you have never managed any multis at all, you are a much bigger risk to them. Most lenders won't consider it, and managing a 2BR house counts as no experience at all.
It depends on your liquidity and net worth.
For instance if you want to buy a 3 million apartment building and have never owned that type of asset then your assets come into play.
If you are putting 750,000 cash down and still have 500,000 or higher liquid but no experience the lender feels better about things. Especially with that deal size you can have a PM management company run it who does nothing but apartment buildings.
If you are talking 10,15 unit type things then YES those are more dependent on the owner operator to be a success and local banks will want full unlimited recourse against you.
So the answer is it varies all across the board. When my clients try to get a loan we look at the asset quality, location, demographics, their assets, etc. to see if it's possible on their own. If not but the deal is good then you can bring in partners. My buyers tend to like large deals because we can land non-bank non-recourse loan with ten years fixed in the commercial space and a fixed interest rate.
@Alex E. looks like
@Joel Owens pretty much covered it. I'd also mention that a creative way to get into a deal without management experience is with a Master Lease with Option to Purchase. This allows you to gain that management experience while the the seller is still on the hook to the lender. (note: make sure lender is aware and approves, in writing, this agreement). Then, when it comes time to exercise your option to purchase, you'll be more favorable to the lender. It'll still boil down to your net worth and liquid assets but it'll help you get that experience under your belt.
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