Multi-Family and Apartment Investing

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Clayton Cerer
  • Rental Property Investor
  • Chicago, IL
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Apartment loan and fees associated

Clayton Cerer
  • Rental Property Investor
  • Chicago, IL
Posted Dec 5 2019, 07:48

Hello!

We are working on our loan for our first apartment deal. It is a 24 unit property. Fairly clean deal. Loan amount is 1,098,000

Our lender is saying we have about $14k in estimated costs of due diligence, documentation, appraisals, etc. this $14k is outside of the additional $10,098 that we will pay for origination fee... plus we still need to pay our attorney...

Does the 14k seem high??

Please let me know your thoughts!

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Mandee H.
  • Investor
  • New Hope, PA
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Mandee H.
  • Investor
  • New Hope, PA
Replied Dec 5 2019, 07:59

Hi there!  I'm hoping to purchase a small apartment building in 2020- so I'm curious of the answers you'll get!  Ps. how much of a deposit did you have to put down - 25%?  How many people are investing with you?  I have 2 (singles and one duplex and just had a short sale offer approved) so that's been my "comfort level" - congrats and thanks for posting a great question!

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Todd Dexheimer
  • Rental Property Investor
  • St. Paul, MN
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Todd Dexheimer
  • Rental Property Investor
  • St. Paul, MN
Replied Dec 5 2019, 08:53

I typically assume around 3.5-4% of the loan amount in closing costs for a smaller MF under $2mm. For larger deals it will be closer to 3%. 

As for DD, the $14k is legit, but that depends on what you do. Hiring an inspector will cost $2000-$5000+ depending on what you have them do. I hire a sewer scope on properties over 20 years old. I also have a termite inspection, if you're in an area that has termites. Then you have your property survey, phase 1 environmental and appraisal

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Greg Dickerson
  • Developer
  • Charlottesville, VA
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Greg Dickerson
  • Developer
  • Charlottesville, VA
Replied Dec 5 2019, 10:22
Originally posted by @Clayton Cerer:

Hello!

We are working on our loan for our first apartment deal. It is a 24 unit property. Fairly clean deal. Loan amount is 1,098,000

Our lender is saying we have about $14k in estimated costs of due diligence, documentation, appraisals, etc. this $14k is outside of the additional $10,098 that we will pay for origination fee... plus we still need to pay our attorney...

Does the 14k seem high??

Please let me know your thoughts!

This sounds reasonable but an itemized list would be helpful for me to see what the total cost consists of. 

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Account Closed
  • Investor
  • Ormond Beach, FL
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Account Closed
  • Investor
  • Ormond Beach, FL
Replied Dec 5 2019, 10:22

Loan origination fee of $10k is very high. We recently secured financing for a 28-unit deal in Bloomington IL and paid under $5k. DD cost of $14k also sounds on high end, but I don’t know how many or what reports/inspections your lender is requiring. Good luck ! 

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Tj Hines
  • Specialist
  • Tampa, FL
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Tj Hines
  • Specialist
  • Tampa, FL
Replied Dec 5 2019, 15:34

@Clayton Cerer no the 14k does not seem high. Seems right in line for a property and loan amount that size. Good luck

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Clayton Cerer
  • Rental Property Investor
  • Chicago, IL
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Clayton Cerer
  • Rental Property Investor
  • Chicago, IL
Replied Dec 5 2019, 15:41

@Tj Hines Thanks for your feedback!

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Clayton Cerer
  • Rental Property Investor
  • Chicago, IL
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Clayton Cerer
  • Rental Property Investor
  • Chicago, IL
Replied Dec 5 2019, 15:41

@Todd Dexheimer thank you very much for your feedback, this is our first commercial loan so we just want to make sure we are in line with market rates.

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Clayton Cerer
  • Rental Property Investor
  • Chicago, IL
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Clayton Cerer
  • Rental Property Investor
  • Chicago, IL
Replied Dec 5 2019, 15:42

@Mandee H. Hello, if you want to message me and ask questions about our process I’d be happy to answer them. So far it seems those costs are right in line with market, however we have now secured agency debt with much better rates. We have gone from a 5.39 down to roughly 4.38 by qualifying to agency debt

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Mandee H.
  • Investor
  • New Hope, PA
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Mandee H.
  • Investor
  • New Hope, PA
Replied Dec 9 2019, 08:48

Thanks so much Clayton!  Will do!