Apartment complex financing

[Erick Miller]

Looking to buy my first apartment complex I currently own 26 single-family rental properties that are managed in house and I flip 10 to 12 houses per year and have extensive construction/Inspection background my question is do I need a partner for experience or net worth to get 2- $5 million long term loan? Net worth between1- 2 mil Thanks in advance!

[Nick Schoch]

It sounds like you have good experience and you're ready to expand into multifamily (5+ units).

The short answer to your question is "yes." Generally, you can always find financing but it may not be on terms or pricing you like.

Regarding guidelines, let's use Freddie Mac's Small Balance Program parameters (see CBRE's summary here) since they make a good portion of the market and their terms are similar to many banks.

You'll notice on page 3 that they indicate a minimum net worth equal to the loan amount and minimum liquidity equal to at least 9 months of principal and interest. You said your net worth was $1-2 million. This would suggest that Freddie would be hesitant to lend over $2 million to you. You may be able to mitigate this factor by putting more equity into the transaction and decreasing the leverage (lower LTV, higher debt service coverage ratio).

Regarding your experience, I believe you would qualify for financing if the proposed collateral property fits their guidelines and the deal doesn't have any hair on it. If there is an issue here, you may be able to mitigate it by hiring a professional property manager. In my lending experience, I have not seen deals declined solely because the sponsor has limited experience.

I hope that helps.