How to Finance a 17-unit Apartment Complex

[Micah Uveges]

Hello,

I am interested in the purchase of a 17-unit complex in my area and don't know where to start with the financing part of it. It is in rough shape and needs extensive renovations (near $200k). It's currently listed for $400k but I would not offer more than $300k. I spoke to a lender I've worked with before and he mentioned lenders might require 1) a minimum loan amount for a property like this and 2) a JV with someone with experience being required.

Does anyone have any experience with something like this? I know it could be a great deal if I figure out how to purchase it.

Thank you!

[Arn Cenedella]

@Micah Uveges

Based on loan amount and the need for cap ex money, I suspect a small local bank or credit union will be your best bet. 

In my market Greenville SC Greenville Federal Credit Union is our “go to” lender for smaller fix up deals like this. 

Call around ask your broker to get a few referrals. 

Loan terms might be:

65% to 70% of purchase price 

Plus 75% to 80% of the cap ex. 

Note most often you have to do the work, lender then inspects and then the cash they hold is released to you. So be sure you understand how it all works and your cash needs. 

Terms might be:

7% rate

5 year note with ballon

If lucky you might get a year of interest only and then 25 year amortization. 

Be sure loan has NO prepayment penalty. 

This debt will get you into property. Once fixed up leased up stabilized performing with at least 3 to 6 months track record then you might be able to go to longer term more permanent financing. 

Good luck!