Multi family

[Ryan Wright]

I'm looking to invest in multi-family but my DTI is pretty much at its limit. I've looked at several ways to incorporate deals but the majority of sellers want a loan from the bank. How can I continue making offers without considering my DTI? The numbers are very high and if there is any profit margin, I'm looking at around 150-300/month cash flow. It's not much! I need your help! Any ideas BP? Ryan Wright

[Richard Copeland]

Ryan: I own a debt and equity firm that arranges financing for commercial and multifamily real estate across the country. In regards to the DTI, the previous posted comments are partially right. It all depends on the bank. For this conversation, I will stick with multifamily as defined by most banks and HUD, 5 or more units. I will also break financing up in to two groups, recourse and non-recourse lenders.

Recourse lenders are typically your local, regional, national, and community banks. Depending on which one you utilize they will not look at your "DTI" but they will look at your global cash flow in addition to the income and expense of the property. All will look at you credit score. Community, local, and regional banks will be you best bet to avoid looking at your global cash flow.

Non-recourse lender are easier to work with and only focus on the income from the property itself.  They do review your credit score, but are not concerned about your global cash flow.  They want to know do you have cash to close, will you have cash left over after closing, and what kind of experience do you have.  Non-recourse lender typically provide the best overall terms, but they come with prepayment penalties.  The cost of the overall transaction is more depending on the lender, but you get typically better terms.  

If you have any questions, send me a colleague request.