30-Unit Lending, Not enough experience to get funding?

[Luke Tetreault]

Hey everyone, so I’ve been investing in smaller duplexes, triplexes for the last year and half. No prior experience investing experience, have always just worked a regular w-2 job as a welder. Not high earning 90-120k. 27 years old. 700 credit score. 

I have been really trying to push into bigger deals, I have finally come across a 30-Unit in my area off market, that is a great value add opportunity. I’ve been negotiating seller finance options for the past 3 months, trying anyway to get this closed. Knowing that would be my most realistic way to get a break on such a large purchase price. The sellers came back and shut it down, will not accept anything but a full payment. 

Talking with my local credit unions, they don't look at me like a serious buyer. Not for somthing of this size, I wasn’t taken serious it felt like. The numbers work, but it seems the issue was me as a borrower. I don’t have the money in the bank like they’d like to see, but I have built relationships with investors who would fund everything I would need to get this closed plus renovations. There was pushback from lenders because “I wouldn’t have any skin in the game” if I used investors. I really don’t know where to go from here. I don’t want to just throw in the towel on the deal due to funding. Because I feel like this is one that could take me to the next level. I do understand their reservations, but there has just got to be a way.

Anyone have any input on this situation?How you pulled off your first big deal when you were starting out? Thank you!

[Evan Polaski]

@Luke Tetreault, it sounds like your local credit unions don't have much commercial sized multifamily experience, or are very conservative.  There are a lot of details you haven't filled in in this post (which is fine), but you will likely need a key principal to co-sign loan and a contract with an experienced property management company.

The key principle will co-sign the loan to help show the net worth and liquidity needed for the underwriting department.  And given you only have a year and a half of experience, lenders often want more property management experience on the property.  

From a "you personally don't have enough skin in the game" this sounds like a credit union who does not work with real estate investors much.  I would continue you hunt.  Like Robin said, you could stumble on a bridge lender that will give you a ton of proceeds in mortgage, but that runs its own risks.

If you want the conservative, but open to lending to your LLC with outside investors, get on Fannie Mae's website and look up the small balance brokers. Again, you will likely need a key principle to co-sign your loan (typical financial requirements are 10% of loan balance in liquid assets and 1:1 net worth to loan balance), but Fannie and Freddie are both well versed in lending to LLCs where the GP has minimal capital personally invested in the deal. Local brokers can give you more color, but I would also be prepared to only get 60% to, maybe, 70% LTV limited by DSCR. So you may need to come in with a lot more equity than you anticipated.