Commercial Loan-Would I be able to obtain financing for this

[Anthony G.]

Hello BP Community,

Wanted to throw a  scenario out there, to see how realistic or easy/difficult it would be to obtain financing from a bank on a commercial multifamily property, or discuss possible work arounds.

Experience 

Owning and self managing a 4 unit residential property for a decade then gut renovating it to re-rent it for much higher. Licensed RE Agent in NYS, experience mostly in residential as well.  (Assuming none of this will transfer over as experience in commercial though)

Income 

Self employed in Construction/RE and rental income totaling around 100-120k net per yr, in the last 2 years. 2017 return estimated be 10-15% higher

Credit 

780+

Lets say I found a deal underwritten conservatively on a large stabilized MF at 10 million , with 25-30% down of my own, and investor capital, plus I was able to meet the banks DCR, liquidity & reserve requirements. Would I have trouble obtaining a loan of this size because of my lack of experience, or the fact that I'm looking to borrow much more than my own personal net worth, assuming the deal itself was solid, and made the bank comfortable? Are there any ways to make this scenario workable? Personal guarantee? Bringing on a key sponsor to meet the net worth requirement? I believe I read somewhere you can find an investor to sign onto the deal for a couple points in equity on a non-recourse loan to satisfy the banks net worth requirement, which would be a win-win, but I can't really see how the bank wins, or would let that fly, honestly that advice sounds like some late night tv commercial guru stuff, but I could be mistaken.

If there is any critical piece of info you think Im missing here, or any thoughts, advice, or how I should mange my expectations on something like this, that would be great, and I would love to hear from you! 

Thanks

Anthony

[Tim Milazzo]

Hi Anthony,

Sounds exciting to be getting into bigger deals! Here's my 2 cents. Getting a bank loan in your scenario, at 25-30% down, is most likely going to be full recourse financing. With enough liquidity, you should be able to find a bank to get you to 70% LTV and at least 20 year amortization to do this, if the property itself supports such a loan.

Now there's another option, which is non-recourse, lower rate, and higher LTV (up to 80%), but that you don't personally qualify for due to Net Worth. That's an agency loan, backed by either Freddie Mac or Fannie Mae. They expect higher net worth and some more experience, but if you're able to find a co-sponsor that meets those requirements, that would be another option.

 - Tim