Multifamily in Midwest?

[Deep Patel]

I am currently trying to 1031 exchange a property in NJ that should clear upwards 400-500k that I am looking to invest in multi family in the Midwest (I believe this is the best place to invest for cash flow). I hope to use that capital as a down payment. Since this would be commercial real estate is it true that income is not essential and credit score and NOI are more important? Looking for any suggestions in multi family brokers in the Midwest. Looking forward to trying to make something work and maybe turn around life into semi retirement with such a property.

[Brian Ploszay]

The midwest is a very large place.   Cash flow is higher here, compared to New Jersey and especially New York City.  

Here are a few things to note:

1.  Secondary (smaller cities) have even better cash flow opportunities.  There is a reason why - these towns do not have the best economic prospects.  

2.  You are right about commercial loans.  They will underwrite it several ways.   First, they will analyze the cash flow.  Second they will analyze the value of the asset, using comparables.   And last, they will look at the strength of the borrower.  You are right that they will not fully depend on your main income for their loan approval, like borrowing money for a house.  They usually will request that you fill out a financial statement.  It will look at all of your assets, liabilities, including your income.   If you have a low credit score, that will be a red flag.

Anyway, I am in the Chicago area, so I can give you advice only in this market.  You'll need to chose where you want to go and focus on looking for a property in that market.   It is rare that multi-family brokers span all over the midwest, except for the largest transactions.  Brokers tend to be market specific.   PM me if you want more questions answered.