Specialist · Jacksonville, FL · Member since 2017 · 12 posts · 5 votes
I am a realtor out of Jacksonville, Florida. My mentor has agreed to provide me with the funds (up to 25% and the rehab costs) to fill the gaps for a commercial loan so that we can buy an apartment, anywhere from 5-30 units or so. I have great credit but, my taxes will not be sufficient since I am self-employed. Here is my question:
What order do I go in to get a loan to purchase a deal? Do I find a deal first and then go to a bank to try to get the loan or do I need to get pre-approved with the bank for the loan first to get the deal?
Investor · Dallas, TX · Member since 2016 · 168 posts · 195 votes
9y
@Justin Bullock I agree the property is more important, but you will also want to put together a Personal Financial Statement (PFS). I would then go over the PFS with a lender to get their thoughts on what price range you are able to pursue. When you are purchasing apartments, there are some general rules that a lender will expect. For example, a lender will typically want your net worth to be 100% or more than the loan amount. Also, your post liquidity funds will need to be at least 9 months of principal & interest to 10% of loan amount. However, you can have others sign on the loan with you if you do not have enough net worth or post liquidity requirements. Hope this helps.
Rental Property Investor · Philadelphia, PA · Member since 2015 · 213 posts · 160 votes
9y
For a commercial loan the property is more important to them than the person, at least in comparison to a residential loan. They will want to see the financials of the property before they are comfortable making a loan.
Rental Property Investor · Meeker, OK · Member since 2017 · 48 posts · 26 votes
9y
It seems, in my research and after getting a construction loan through a commercial lender the money required up front is a bit more compared to residential; but the lenders typically have more creative ways to get your deal done.
Investor · Dallas, TX · Member since 2016 · 168 posts · 195 votes
9y
@Justin Bullock I agree the property is more important, but you will also want to put together a Personal Financial Statement (PFS). I would then go over the PFS with a lender to get their thoughts on what price range you are able to pursue. When you are purchasing apartments, there are some general rules that a lender will expect. For example, a lender will typically want your net worth to be 100% or more than the loan amount. Also, your post liquidity funds will need to be at least 9 months of principal & interest to 10% of loan amount. However, you can have others sign on the loan with you if you do not have enough net worth or post liquidity requirements. Hope this helps.
Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
9y
@Justin Bullock I'll echo what everyone else has said, especially @Tamiel Kenney, with one caveat. You need to find a lender, be it a local/regional bank or credit union, who wants to make loans on small apartments. Some may want to be in that space and others may not. It could be for a number of varying reasons that don't have anything to do with you; they may not have anyone on staff to underwrite them, the asset may not meet with their strategic goals, or something else.
Short answer to your question: find a bank that loans in the asset class you want to be in, find the property, then bring it to the bank.
Specialist · Jacksonville, FL · Member since 2017 · 12 posts · 5 votes
9y
To all of you, I am most appreciative of your advice and input. Thank you for taking the time to respond to this post and I now feel confident that this is a viable opportunity! I'm excited to make this happen!