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Can I Qualify for an Apartment Loan if I have very little to put down?
Almost all Multifamily Loans require a minimum of 20% down plus
closing costs to purchase an apartment complex. Even before the
recession this has been the requirement. On average apartment lenders
require 25% down for ?A? quality permanent multifamily financing.
Keep in mind that a lender will want you to have what is called ?skin
in the game?, to approve you for apartment financing. In other words
they want you to have to risk a good chunk of your precious cash too.
They view the risks of an apartment loan the same way they view a
business loan. Apartment lenders have experienced that entrepreneur?s
that put very little down on a business loan – let?s say under 15%
have a much greater chance of defaulting on their loan payments if
things get tough. The same loan officer?s often make commercial loans
and a commercial investment usually fails for the same reasons
businesses fail ? poor management or being under- capitalized. So
the more you put down the more resourceful you will be to overcome
obstacles. In other words you will be willing to fight like the
dickens to keep your apartment building running smoothly and
profitably and thus protect your investment. Furthermore you will be
more likely to make your multifamily loan payments on time.
Fortunately there is a solution if you have less than 20% to put down
on an apartment loan. And it probably will not be owner carry
financing which if allowed by your apartment lender will not eliminate
the lender?s requirement for you to have 20% skin in the game. The
solution is for you to find a partner that has some cash to invest
with you to jointly make the 20% down plus closing cost requirement.
In order to attract an investor you will have to find a great
apartment complex to buy. One that probably is in decent condition
and cash flows amazingly well. I assure you that such a property will
enable you to attract an investor who will have the opportunity to
make a much greater return on their investment then the stock market.
You can likely keep a larger share of the ownership of the property
just because you put the time in to find the property and do your due
diligence.
By Terry Painter/ President Business Loan Store, and Apartment
Loan Store.com