Buying Apartment without major experience in SFH

Multi-Family and Apartment Investing
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Buying Apartment without major experience in SFH

Brandon S.
Rental Property Investor · Washington, DC · Member since 2015 · 88 posts · 45 votes

Hello,

I'm looking to purchase a 16 unit apartment complex in Washington, D.C.  I've been doing flips for a few years and saving all profits, plus savings from my primary job.  I also have owned 3 single family homes that were rentals, which I've sold 2 of 3 and made a nice profit.  

I'm going to continue to do flips, but my friend/business partner who used to work in the mortgages industry told me it would be hard for me to get a commercial loan because I haven't managed that many single family homes at once.  I've never heard that. 

Does anyone know how common that really is?

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Chibuzor Nnaji
Multifamily Investor · Dallas, TX · Member since 2016 · 67 posts · 92 votes
9y

Hi @Brandon S., I’d like to piggyback on what @Kim Meredith Hampton said. Most lenders who will provide the loans you need for larger multifamily purchases would like for you to have experience in purchasing large multifamily deals or be teamed up with an experienced property management firm that has managed properties similar to what you want to acquire. So basically something you can do to be qualified for the loan is team up with the experts so a great property management firm, someone who has a lot of experience in the multifamily arena or someone with a large balance sheet that can be a guarantor for the loan. I hope this helps!

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  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    9y

    @Brandon S. Most larger loans for multi family require experience, or hire a PM to assist in the management. Look for a good PM to partner with on your acqusitions of multi family, then it is a possibility to gain your experience in future deals

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  • Nathan Click
    Lender · Morrisville, NC · Member since 2015 · 610 posts · 131 votes
    9y

    @Brandon S. Experience is an important part of getting financing, but it can still be done with limited experience.  You may be limited to a specific group of lenders but it can still be profitable.  I've worked with clients who have not had a lot of experience and we were able to finance them with little trouble.  In these cases you are going to want to make sure you have enough for a 25% down payment, good credit, and as always a good property.  I hope that helps.   

    2Reply
  • Abel Sng
    DFW, TX · Member since 2016 · 58 posts · 68 votes
    9y

    @Brandon S. partner up with someone that has MF experience and track record and you can piggy back on them for the loan. A lot of MF sponsors start out that way!

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  • Chibuzor Nnaji
    Multifamily Investor · Dallas, TX · Member since 2016 · 67 posts · 92 votes
    9y

    Hi @Brandon S., I’d like to piggyback on what @Kim Meredith Hampton said. Most lenders who will provide the loans you need for larger multifamily purchases would like for you to have experience in purchasing large multifamily deals or be teamed up with an experienced property management firm that has managed properties similar to what you want to acquire. So basically something you can do to be qualified for the loan is team up with the experts so a great property management firm, someone who has a lot of experience in the multifamily arena or someone with a large balance sheet that can be a guarantor for the loan. I hope this helps!

    3Reply
  • Brandon S.
    OP
    Rental Property Investor · Washington, DC · Member since 2015 · 88 posts · 45 votes
    9y
    So say I want to buy a 25 unit complex and have a 800 FICO score with a 25% down payment plus a reputable PM firm in place, does anyone see any issue?
    1Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    9y

    16 and 25 unit properties are in the micro/small category. These are in no way considered large. I don't think your lack of MF experience will be an issue. If you are going to continue flips I would have a PM handle your 16 unit property and have a special purpose entity own it (e.g. an LLC with just that property). If you plan to borrow over $1M from the Fannie Mae or ($1M-$6M) then you will need an entity anyway. If you go that path, the lender's underwriting will require your net worth to exceed your borrowed funds.

    My 2 cents..

    3Reply
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