preapproval or prequalification on 16 unit offer

3 Replies

I am going to put an offer in on a 16 unit for $500k.  The property just came back on the market and i would think the seller would want to see a prequalification or preapproval letter from the local bank I've been talking with.   Is this a good assumption?   Also the property is a value play and presently only 50 percent occupied.  Will the bank provide a preapproval or prequalification on the property or just me at this stage in the game? 

@Charles Mangum

Hello, you probably need to know if your local bank will finance this deal first as it is categorized as a commercial property, and the property has to qualify for the loan, not you.

Some questions to ask are the minimum DCR and LTV/ARV requirements?

Is 50% occupancy an issue?

Does the bank have minimum net worth or liquidity requirements?

What amortization do they offer as this will effect your numbers and cash flow.

Prepays, points, and origination fees?

Do they require you to fund loan in a business entity like an LLC?

Iif your bank can't do the deal then seek out the commercial departments of local banks and credit unions in the area of the 16 unit.

Hopefully this proves helpful.

Good luck!

Hello Charles, I'm a private lender you need to know or I hope you have the following information. This information will let you know if your bank will loan you the money based on the following. Annual Scheduled Gross Income, Annual Expenses = NOI, do you know what the Debt Service Ratio is for this property now and when it's fully rented? A good DSCR is 1.25 or better, if that is the case your bank should be able to help you out. Any questions please email me [email protected]

Thank you both.   Is it common that in a scenario such as this that some sort of pre qualification or preapproval be submitted with the offer to purchase? 

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