List of Lender Denials for Inexperienced Multifamily Syndicators

[Dan Handford]

Many of the people here on BP are inexperienced when it comes to multifamily syndication. I thought it would be a good idea to begin a list of reasons that a lender may deny someone a loan due to their inexperience. 

Here are the main two: 

Objection 1) 

Denial Reason: No experience managing an asset with a large number of units

Ways to Overcome: Hire an experienced property management company with a solid track record in the asset class you are seeking. In addition, you will need to bring someone on your team with experience not only managing the units but also managing the financials/asset once you close. No lender is going to lend you money if you have never managed a large multi-million dollar budget before.

Objection 2) 

Denial Reason: Low net worth and liquidity

Ways to Overcome: The answer here is simple...find someone with the proper net worth and liquidity to allow you to close the deal. This one may seem like an uphill battle when trying to find the right person. However, when you start networking and attending events you will be able to find these people. In exchange for their high net worth and liquidity, you will need to give them some equity. The equity you give will be totally worth it because you wouldn't be able to take down the deal without them. 

Calling all experienced syndicators! Please list additional denial reasons here for others to learn.

[Mike Dymski]

Hey @Jay Hinrichs. I have two real estate offerings in my inbox from more experienced sponsors who are working with less experienced co-sponsors who found the deal but don't have the experience or investor database yet to take down the deal themselves. Many of these "inexperienced" co-sponsors are professionals and/or have a fair amount of prior real estate success in SFR or small MF and they are just scaling up with larger properties. This is also common in the MF investor clubs and coaching programs...it's a stepping stone.

There are some investors (like myself) who are open to co-signing non-recourse loans to help sponsors meet Fannie and Freddie net worth and liquidity requirements.  There is compensation for doing this (equity participation) and some of us enjoy working with aspirational people.  I am honored to be currently working with a young sponsor (with a speech impediment) who has a deal under contract and is raising capital...talk about courage.  He switched gears this week from Fannie/Freddie financing to bank/bridge financing and may no longer need a co-signor but we will see how it plays out.