July 8, 2014
The answer is that it depends.
There are two factors in answering this question correctly:
Factor One – The banker decides if you have enough experience to get an apartment loan.
Factor Two – You decide.
Here’s an example of where factor two comes into play: Let’s say that you have no experience in ownership of multifamily properties, yet you have great wealth. The bank decides there is very little risk in lending the money to you because of your wealth. You end up purchasing a 10 unit apartment building.
But, because of your lack of experience, a number of serious problems occur, and it becomes a very difficult and painful situation for you. Such problems start to snowball when you discover that you don’t know how to manage your property manager due to your lack of experience. His accounting is messy, he doesn’t qualify tenants well, and you start to lose money. Later on one tenant does serious property damage and your property manager does not execute eviction properly.
Things progress downhill. Can it get worse? Yes. It is not that uncommon for property managers to steal money from the property owners.
So experience in multifamily ownership and qualifying for an apartment loan doesn’t only have to do with whether the lender will decide that you have enough multifamily experience – it also has to do with your own self-assessment of the degree of experience you have. Do you know how to handle such problems as managing the property manager and how to handle eviction?
How do you determine if you have enough experience?
Be sure that you talk with experienced multifamily property owners to get a reality check on whether you have the needed experience. Multifamily ownership is a complex business and it has a lot of skills that take time to develop. Ask experienced multifamily investors to let you know the skills needed to be a successful multifamily owner.
By the way, if you do not have enough experience, a solution is to partner with someone who is rich with multifamily ownership experience. This is a subject for another blog.
Feel free to call or email me if you have questions concerning apartment loans or other types of commercial loans. I can be reached at 214-695-7310 and email@example.com
Also to find out more about our loan products and rates, see our Loan Products page.
Bruce Painter, Director of Marketing, Business Loan Store