Commercial Financing...

[Nik S.]

Hello Everyone! I am just getting into contract in the next few days with a 47 unit multi-family property. The numbers are great, the occupancy is high and the property is well maintained! My questions is this....

I am going for a meeting next week with my first lender who is/has done deals within the last year with financing multi-family properties. He has already reviewed the numbers on the property and says it looks very solid...

Here's the tricky part... I am a younger investor. The lender said, first he needs to have 20% cash down payment.. Good part is, I have the cash in my savings account! Next, my credit is great....800+....

Now for the bad news...I only show very little income, maybe $40,000 a year (self-employed)...

The debt service coverage ratio is "1.64"...fairly strong..Property historical tax returns speak for themselves.. Problem is, I don't.

I have the cash down payment required by the lender, I have the credit score needed but I don't have a large enough income on paper coming in...

Here's another curveball... I have a father who is well-qualified for the loan. This being my deal he wants me to do this solo...He has mentioned he is willingly to co-sign because he has cash reserve accounts which would justify the "recourse" aspect to the lender however he doesn't want his "debt to income" ratio to get skewed because he wouldn't being earning any "profits" from this deal...

So firstly, is there any hope for me qualifying?

Secondly, is there a way for my father to be on the loan without it affecting his "debt to income ratio"? In case he wants a loan in the next few years, I don't want him to be affected by being on the loan..Is there a different way to structure the loan buy just utilizing his cash reserve accounts?

Please advice everyone, looking for all suggestions...

Thanks!

[Joel Owens]

True story. I was talking to another commercial lender friend of mine. An investor with a high net worth was wanting a premium term loan. They owned hotels and had about 6 million liquid and another 5 million in equity assets.

They were going for another hotel with my commercial mortgage broker friend. Apparently the investor had a second home that was slightly underwater in value. An attorney had advised him to stop making payments and short sale the property!

The payments were about 2,000 a month. So when the time came for his loan to come through it was denied. Befuddled the high net worth investor couldn't believe the commercial lender wouldn't approve them. The lender stated if they would stiff someone else over such a small loan what did that say about their character on honoring a much larger one.

So here is this high net worth borrower with perfect credit and now it is blemished thinking they would save 2,000 a month. Now the increases in interest rate for all facets of his life will way more than pass 2,000 a month in his carrying costs. This investors could have rented his place out or completed a ton of other options that wouldn't damage them like this. Remember not all attorneys give good advice!

It just blows me away how people even with lot's of money do not logically think things through.