Apartment opportunity but cant get a loan due to vacant units.

Los Angeles County, California
Private Lending & Conventional Mortgage Advice
4yFollow

Apartment opportunity but cant get a loan due to vacant units.

James Dee
Member since 2022 · 1 post · 0 votes

I'm trying to close a deal, but I can't get enough financing because half the apartments are vacant. This property is a great deal; should I try to find a partner to buy it all cash? Or should I find a hard money lender and finance a loan later after I get the apartment up and running in a month or two? Or is there any other way I can get a loan approved? I'm putting down about 40%.



0Reply
98 views

Most Popular Reply

Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
4y

@James Dee Assuming the numbers make sense, do it anyway you can get it done. If you have both the opportunity to use a partner OR a hard money lender run the numbers both ways and see what make the most sense for you. If you don't already have a money partner lined up, it can be difficult to find one on short notice. 

You didn't mention how large a building you are talking about. A 5 unit building vs a 100+ unit complex is a big spread in the amount of money needed and will affect your choices. 

1Reply
See this reply in the discussion

18 Replies

Jump to latestLatest
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    4y

    @James Dee Assuming the numbers make sense, do it anyway you can get it done. If you have both the opportunity to use a partner OR a hard money lender run the numbers both ways and see what make the most sense for you. If you don't already have a money partner lined up, it can be difficult to find one on short notice. 

    You didn't mention how large a building you are talking about. A 5 unit building vs a 100+ unit complex is a big spread in the amount of money needed and will affect your choices. 

    1Reply
  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    There is probably a reason they are vacant. That reason likely requires some time, efforts, and additional capital to get it stabilized. You should have no issues finding a private lender if your equity position is 40%. Stabilize and refi into a more permanent financing product in 12-18-24 months 

    0Reply
  • Nicholas Coulter
    Real Estate Agent · Southern California · Member since 2019 · 681 posts · 281 votes
    4y

    @James Dee Partnership would likely be cheaper money but you split some equity in the deal. If the numbers are good I would say hard money might be the option. With 40% down I dont think youll have an issue getting the funds. 

    1Reply
  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 958 votes
    4y

    @James Dee how many units is the property? HML/Bridge loan is the way to go. Don't give up equity if you don't have to.

    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    4y
    Quote from @James Dee:

    I'm trying to close a deal, but I can't get enough financing because half the apartments are vacant. This property is a great deal; should I try to find a partner to buy it all cash? Or should I find a hard money lender and finance a loan later after I get the apartment up and running in a month or two? Or is there any other way I can get a loan approved? I'm putting down about 40%.




    You can just do an Asset based loan. There is no lease requirement and it is up to 75% LTV

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    4y

    @James Dee You can also go hard money if you are planning to sell or do repairs on the property and then refinance. Just PM'd

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    0Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    4y
    Quote from @James Dee:

    I'm trying to close a deal, but I can't get enough financing because half the apartments are vacant. This property is a great deal; should I try to find a partner to buy it all cash? Or should I find a hard money lender and finance a loan later after I get the apartment up and running in a month or two? Or is there any other way I can get a loan approved? I'm putting down about 40%.




    If you are pretty experienced and think you can get everything stabilized that quickly, why not get a HML? Ideally go with a shop that can do both the HML and the refi

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    0Reply
  • Miguel Vazquez
    Lender · Redondo Beach · Member since 2022 · 8 posts · 4 votes
    4y

    Most Lenders will qualify you with market rents. Reach out if you have any questions!

    0Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    4y

    @James Dee I have to disagree somewhat with @Miguel Vazquez.  Most lenders will have some requirement as to what constitutes a "Stabilized" property. while a lender may have a product for a property that does not qualify, you will be paying much higher rate and terms. Generally that is going to be around 85%+ occupied.  50/50% occupied will not cut it.

    Certainly this is true on larger properties, which is one reason I say the size of the property matters. Generally 4 or less units get different terms and loan programs than 5+ units. 

    0Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    4y

    Agree with the seller today on a selling price. Tell them you will pay that price sometime within 2 years. Until then you will pay the seller an option price equal to 100% of the units bing rented. They get twice the rent until you pay the price they wanted anyway. Or you fail and they just got twice the rent. 

    If you have a boatload of money you could offer 10-15% of the sale price (against the future sale price) as well, but keep enough to put 25% down. Either you are completely rigth and in 3-6 months you buy the property having only spent the equivalent of the rent on the vacant units, or you were wrong and you only lose 1/2 as much money when you walk away. 

    1Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    4y

    @James Dee

    While banks, agencies, HUD, and conduit lenders aren't the only types of apartment lenders out there, they're generally the only types of lenders suitable for a first time apartment buyer. Options for more experienced multifamily borrowers include life companies, which offer long, fixed-rate terms at very low rates (but generally want highly experienced investors), and hard money loans, which typically have very high interest rates, but can be the only form of financing accessible to borrowers with credit or legal issues. For additional leverage on larger deals, a borrower may be able to layer a CMBS loan.

    Good Luck!

    [email protected]832-776-9582Podcast Guest on Show #469
    NETWORTH BUILDERS5236 Reviews
    WebsiteView Page
    0Reply
  • Ryan Deasy
    Lender · Farmington, CT · Member since 2015 · 542 posts · 321 votes
    4y

    @James Dee

    hard money all day long. this is a great deal for hard money based on what you have described. ive done hard money alot. happy to share experiences etc.

    0Reply
  • Mark LangdonPro Member
    Investor · Whippany, NJ · Member since 2010 · 356 posts · 104 votes
    4y

    Got to go with a bridge loan. That is made for this situation. Bridge loans are not so easy now but worth looking into. 

    [email protected]973-464-3839
    1Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    4y
    Quote from @James Dee:

    I'm trying to close a deal, but I can't get enough financing because half the apartments are vacant. This property is a great deal; should I try to find a partner to buy it all cash? Or should I find a hard money lender and finance a loan later after I get the apartment up and running in a month or two? Or is there any other way I can get a loan approved? I'm putting down about 40%.




     There is a lender that can do up to 75% without the units being leased. Just PM'd

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    0Reply
  • Jo-Ann LapinPro Member
    Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
    4y
    Quote from @Erik Estrada:
    Quote from @James Dee:

    I'm trying to close a deal, but I can't get enough financing because half the apartments are vacant. This property is a great deal; should I try to find a partner to buy it all cash? Or should I find a hard money lender and finance a loan later after I get the apartment up and running in a month or two? Or is there any other way I can get a loan approved? I'm putting down about 40%.




     There is a lender that can do up to 75% without the units being leased. Just PM'd


     A little late here is the party  to the post hml may be a great bridge for the multi family opportunity .

    [email protected]
    0Reply
  • Michael Kinsella
    Lender · Member since 2018 · 617 posts · 275 votes
    4y

    @James Dee 

    A bridge loan probably makes the most sense in this situation.

    As an umbrella rule, debt is going to be cheaper than equity.

    Bridge lenders tailor their products to accommodate situations like the one you mentioned, so it shouldn't be too much of an issue to obtain bridge financing assuming you're otherwise creditworthy and the building is in a reasonable state.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free