Questions about Commercial financing

[Taylor K.]

Hello Everyone, 

I have some questions regarding commercial financing. I have a duplex purchased through conventional financing. I am looking into a 7 unit in which I would be purchasing with a partner. We have plenty of money for a 20-25% down payment, but the problem is our income. My partner is a college student with very little waitressing income, but a decent amount of capital (35k) and no debt. I work full time and have about the same amount of capital. The asking price for the building is $165k. The gross rent is about $3500 a month. So my question is do you think this is possible for us to pull off? How much do banks consider DTI into commercial loans?

[Jason Million]

@Taylor K. DTI doesn't come into play on most commercial financing. Commercial financing doesn't use personal income as the calculating factor. They use DSCR (debt service coverage ratio) Does the property cash flow. Take the net income and divide it by properties PITI (Principle/interest/taxes/insurance) and you'll get the DSCR. usually min. is 1.25 or higher for most situations. Also, it will need to be 85-90% occupied to get a long-term financing. If not most likely you'll need to use a bridge loan to acquire and then stabilize and move into long-term financing. Feel free to reach out on any specific questions!