Qualifying for a large apartment complex

[Alexis S.]

I've been looking at buying some SFR's but I happened to come across a 32-room apartment complex in my area for only 1.9 million. My question is would I need to qualify for that loan with my personal income or do they consider the income it makes when considering the loan?

[Brad Hayden]

@Alexis S. -- commercial lenders will size the loan off the appraised value (LTV constraint) and the income that the property generates (DSCR constraint), but they will definitely consider your income, credit, net worth, and experience in their underwriting & approval process.

Possible Loan Scenario:
$1.9M purchase price x 75% LTV = $1.425M loan amount which means the lender will want to see cash investment of $475,000 + closing costs and a net worth of at least $1.425M from you -- assuming that the NOI supports debt service for this loan amount. If the income is a little weak and with interest rate rising, the DSCR constraint may reduce the loan size.

If you have the property physical and financial details, we can have a more detailed discussion.