Private lending for multifamily

[Morgan Brown]

A set of two multifamily properties are being liquidated and sold near me and it’s about $2M before any possible discount/negotiations with the owner. They are currently almost entirely rented condo or townhouse style units, producing income. How would one go about getting a loan to take on the properties? I own a construction company and would manage them and manage maintenance myself, and likely even rent a unit to myself to keep it simple (I’ve been a resident manager before too). My investment company has one property in the middle of a rehab right now, so our assets are all tied up in it but the opportunity is now.

Ideas?

[Nick Belsky]

@Morgan Brown

You may find better pricing by breaking these up into 2 sales contracts and 2 transactions.  Many lenders have brutal release fees to break up a blanket loan these days; many are 125% of the allocated principal balance.  So where you'd save a small amount on UW fees and perhaps cross collateralized title fees by doing a blanket loan, you will lose all that savings and more IF you ever decided to refi/sell one without the other... just a heads up.

The other issue here is you say your assets are tied up... meaning you have no liquidity?  You'd need to show enough funds to close (down payment + HOI + Title + Fees) and usually 3-6 months reserves.  Reserve requirements vary greatly from lender to lender but you have to acceptable reserves of some sort as well.

Lastly, keep in mind, many lenders will not consider managing properties where you are not on title as experience.  So even if you currently manage 100 properties, if none of them are 5+ units and you, or an entity you are a member of, are not on title, then you have no experience.  This disqualifies a lot of borrowers or makes the terms undesirable.

Cheers!