experience requirement

[Alex E.]

Hi,

I just found out that part of the requirement to get a commercial loan for an apartment complex is to have a minimum of 5 years experience managing a large multi-family property, or something similar. Is this requirement set in stone, or would lenders at a bank ignore this requirement? I prefer to get a loan from a bank, not from a hard money lender.

I don't have experience managing a property, but my investing partner has some experience managing a 2 bedroom house that he rents.

[Joel Owens]

Hi Alex,

It depends on your liquidity and net worth.

For instance if you want to buy a 3 million apartment building and have never owned that type of asset then your assets come into play.

If you are putting 750,000 cash down and still have 500,000 or higher liquid but no experience the lender feels better about things. Especially with that deal size you can have a PM management company run it who does nothing but apartment buildings.

If you are talking 10,15 unit type things then YES those are more dependent on the owner operator to be a success and local banks will want full unlimited recourse against you. 

So the answer is it varies all across the board. When my clients try to get a loan we look at the asset quality, location, demographics, their assets, etc. to see if it's possible on their own. If not but the deal is good then you can bring in partners. My buyers tend to like large deals because we can land non-bank non-recourse loan with ten years fixed in the commercial space and a fixed interest rate.