Any apartment lenders that can do 80/20 these days?

[Carlo C.]

Many books that I read have mentioned about making an apartment deal with a 80-20 loan structure. Some of them even suggested the 20% down can be using private money and some could be carried back by the seller. I poked around some commercial lenders recently. Most of them cannot go beyond 60 LTV. I only found one that can do 75 but the rate is super crazy. Any updates on lenders that can still do 80-20?

[Jered Sturm]

We recently purchased a 42 unit building for $2.15M and were able to negotiate an 80LTV with a small local bank.

The loan structure was:

80% LTV

4.25% Interest

5/5 ARM

25 year Amortization

20 year term

minimal closing costs

We pushed very hard to get one of the lenders to 80% LTV they were very reluctant and said " they had never gone above 75% LTV"

After hearing "no" several time on the request to go from 75-80 LTV I offered to deposit the 5% difference (roughly $100k) into a CD at their bank for 6 months. This would allow the bank to benefit by being able to go lend out the CD money and earning more interest on it. Because banks have a fractional reserve they get to lend out 10 times the amount they have on deposit. So hanging the 100K carrot in front of them was like hanging an extra Million dollars for them to go lend out and earn interest on.

This also gave us our money back to use else where quickly. Ultimately we agreed to a 12 month CD which earned 1% interest. 

Then the same bank allowed us to secure a $90k business line of credit against the 100k CD at  3% interest rate. 

When negotiating you have to figure out what the other side wants, and then be creative enough to give it to them in a way they never even thought of. Always look for ways to add value to your business partners like lenders, investors, brokers, etc. 

I was told by lots of lenders you cant do that. stay determined, stay creative, and get it done. 

Best of luck!