How to secure a substantial size loan from a commercial lender?

Question

Hello BP!,

My partner and I came across a really good opportunity in Detroit. Loan would be around $1.4 million and around another $500k-ish in renovations. It’s a 14 unit apartment building that I would hope to end up selling as individual condos if we could get it approved. What would you guys do to fund the project? Commercial loan and private money for the rehab? Any suggestions are appreciated.

Marty Johnston · Answer

@Troy Ronald

Congrats on this opportunity in Detroit! Is your exit strategy to refi/hold or sell/flip?

In short, you could pursue either option you presented.

There are many lenders out there who will finance both the acquisition and the rehab in one loan, however most lenders like to see that you have someone in the borrowing entity with prior experience in renovating a project of this size. Most lenders will lend to first time rehabbers on 1-4 unit investment properties, but experience matters a lot more (to most lenders) when tackling a 5+ MF renovation project of this size.

Generally speaking, if you can bring rehab experience to the project, have liquidity for 20-25% down (depending on ARV and experience) + closing costs + liquid to start the rehab (then reimbursed in draws as work completed), you should be able to obtain financing on this project. A lot of variables to consider though to determine what route will work best for you!

Hope this helps. DM sent also.

-Marty J