West Chester, PA · Member since 2019 · 25 posts · 9 votes
Looking to make the jump into a 3.5M multi unit apartment complex purchase. I can probably put 15-20% down (less would be best), not looking for a partner any recommendations on where I should pursue financing the remainder?
You would probably need closer to 30% and 10-30% post closing liquidity. For a 3.5mm property you would be looking at $1,050,000 down + operating capital and closing costs. Also if you don't or can't roll the rehab into the loan you have to add $$ to fund your rehab as well. Total in for this scenario would be roughly 1.2-1.3mm if the rehab budget is light.
You now have to have the 10-30% post close liquidity which could be as much as 735k in this example.
As you can see there is a lot to this and not just the down payment which I believe you are under estimating unless you do some non-traditional things as some have suggested.
@Danny Randazzo is right, you can do it just have to know the realistic probability of what's truly needed and involved.
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
7y
@Vincent Provenzano I would imagine you would need at least 20% down, and then you would need to show at least 6 months of operating reserves as well. Although I have loved the commercial real estate world, I have found it to be much more capital intensive than the small multi world. If you have the 15-20% down, but not more, why not focus in on a smaller deal?
West Chester, PA · Member since 2019 · 25 posts · 9 votes
7y
@John Warren this could replace a number of smaller separated deals as well as better cash flow and upside on property value. Why not push to do one larger deal?
West Chester, PA · Member since 2019 · 25 posts · 9 votes
7y
@Sam Touroonjian yes going to do this but I continue to hear so much about alternate methods of financing with out the banks and was interested in what has really worked for others.
Real Estate Agent · Atlanta · Member since 2018 · 137 posts · 69 votes
7y
@Vincent Provenzano well banks will generally be able to offer better rates than alternative money sources, so unless you have poor credit, or some other reason why a bank would steer away from you, that should probably be your first choice.
Unless I misunderstood your original post and you're looking for equity partners rather than debt. Are you not looking for a loan basically?
Apartment Syndicator · Charleston, SC · Member since 2016 · 973 posts · 728 votes
7y
@Vincent Provenzano I love the enthusiasm to go big and you can do it. You will likely need more than 20% down and you will need cash in the bank to show reserves like @John Warren mentioned. You might want to pursue an investor who could invest 10-15% of the down payment and show a balance sheet for cash reserves. You could structure their investment as second position debt (if the main lender approves) or preferred equity where they invest X dollars and get a fixed return of 7-12% annually regardless of property performance. The easiest way would be to get a normal partner to invest alongside you and maybe they get a smaller return if you do all the work. Good luck.
You would probably need closer to 30% and 10-30% post closing liquidity. For a 3.5mm property you would be looking at $1,050,000 down + operating capital and closing costs. Also if you don't or can't roll the rehab into the loan you have to add $$ to fund your rehab as well. Total in for this scenario would be roughly 1.2-1.3mm if the rehab budget is light.
You now have to have the 10-30% post close liquidity which could be as much as 735k in this example.
As you can see there is a lot to this and not just the down payment which I believe you are under estimating unless you do some non-traditional things as some have suggested.
@Danny Randazzo is right, you can do it just have to know the realistic probability of what's truly needed and involved.
Mortgage Broker · Dallas, TX · Member since 2017 · 657 posts · 275 votes
7y
@Vincent Provenzano you can get by with 20% down and do an agency small balance loan. The loan amount fits right into their guidelines, but you would just have to fit everything else for that type of deal.
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
7y
@Vincent Provenzano that is a great question. The "big deals" right now are selling at a premium and all of the players seem to be fairly sophisticated these days. I have seen some better opportunities with the mom and pop sized buildings. All of the larger deals I have seen have words like "recent CapEx" in the pro forma. Everyone is renovating 10 units and then selling the next guy on the value add dream (nightmare).
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
7y
Same ^ I am seeing even war zone 10+ units selling for stupidly low cap rates. The 6 units seem to have way more good deals out there being mom and pop owners. Had a 6 unit under contract last month actually with another BiggerPockets member would of been a cool deal but the stairs were totally shot and we broke contract.
West Chester, PA · Member since 2019 · 25 posts · 9 votes
7y
@Henry Lazerow I have had a couple potential 4. & 6s but the cap and other numbers just not right. Talked with someone today and they said they are seeing less experienced investors just jumping to buy and some sellers are positioning for them. I have an interest in a property but it’s about 500K to high they won’t budge.
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
7y
Yeah this 6 unit the owners bought each condo for 25-35k so they were only in it around $200k back in 2012 and havnt done any work and they wouldn't even discount the place when porch was shot. They were trying to sell $400k and wouldn't go down $30k. The property is still sitting. There is some stupid high comps so some sellers are holding out for that similar buyer. I personally don't see it changing anytime soon as rates are dropping but who knows.
Syndicator of Large Apartment Buildings · Glen Mills, PA · Member since 2009 · 1k+ posts · 1k+ votes
7y
@Vincent Provenzano as someone who went from buying a duplex to now closing large deals, the pathway forward isn't easy, but well worth it and you can do the same.
Right now with a crazy market, make sure you are very disciplined with your underwriting and financial analysis of the asset.
Specialist · Fairfield, CT · Member since 2019 · 36 posts · 51 votes
7y
Freddie Mac's Small Balance Loan (SBL) program is probably the best fit. They do 80% LTV but require some reserves for taxes, insurance, and repairs. So you should trim the target purchase price to a deal size that allows you to have somewhere in excess of 20% down.
I've found Freddie's SBL program to have the best rates and terms. Local and regional banks can't compete with them.
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
7y
This is a very interesting discussion. I am coming at this from a stand-point of having bought $40MM worth of apartments in 10 months, and while the Cap rates are compressed and per unit costs are elevated I am very bullish on the sector in specific locations.
I am seeing folks underwrite to the yesteryear, which I understand coming from those who were around in 2008. However, I think we can all agree that 2008 will likely never happen in our lifetimes. And, if this is the case, the pricing we saw in 2012 is not a viable baseline going forward. Meaning, if we use it as a baseline, we'll never buy anything...
What if today's pricing is the new norm and baseline? What would this mean? Or, do we think 2008 is likely to happen again, and if so, why deploy money in the first place?