Hard Money Loan to Purchase Apartment Complex

Multi-Family and Apartment Investing
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Hard Money Loan to Purchase Apartment Complex

Christina Morales
Member since 2019 · 11 posts · 4 votes

Hi! I am looking to invest in real estate, I am in CT where things are expensive. My goal is to one day buy an apartment complex. After doing research I am thinking if should I continue to save until I have enough to put down on an apartment complex rather than buy a bunch of multi families which in the end would cost the same amount down? 

Also, if I were to purchase an apartment complex can I use HML to attain the property and use it as a down payment, then eventually refinance with a bank for better terms? I am unsure of how HML work when buying an expensive property, $800,000 +. If I could use HML to buy a property, then I could essentially get the complex sooner rather than later.

I have good credit and some money saved, but nowhere near enough for a down payment on an apartment complex 800-1M. Looking for some input & guidance in financing world! Thanks for your help! 

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Steve Hall
Rental Property Investor · TX · Member since 2019 · 303 posts · 364 votes
7y

@Christina Morales Welcome to BP!

Impressive first post. Disappointing second post. It seems the responses given above have lead you to believe "I can't afford it." That's unfortunate.

If you want a $1 million apartment complex, figure out how to make it happen!

Forget about HML. That's for short term investors, like flippers. Can you think of other ways to get what you want?

I'll get you started on some things to think about:

1) Connecticut properties are too expensive and have low cap rates. Look for apartment complexes in other states.

2) Seek out seller financing deals. Every seller is different; find one that is open to terms that work with your situation.

3) Regarding not having a large enough down payment, have you tapped all of your resources: IRA, 401K, Life Insurance cash value, equity in your home, etc?

4) Find other investors in the same boat, with the same goals, and go in on an apartment deal together. Owning 25% of a $1 million apartment complex is better than owning nothing, right? Plus it gets you MF ownership experience!

Remember: never say "I can't afford it.", instead say "How can I afford it?"

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  • Justin Lane
    Rental Property Investor · Member since 2008 · 11 posts · 3 votes
    7y

    Hello Christina,

    I can't actually help you with buying an apartment complex however, I may be able to get you closer. I am in California and own an investment property with a sibling. My sibling is currently living in the property and we fell behind as she lost her job and became ill. We are looking to sell the property however we are in pre-foreclosure and the lender requires all of the areas and the current rent. We are looking to sell as we have quite a bit of equity in the house. However, I only have about $4k of the $20k that is currently needed to reinstate the loan. I have a buyer under contract for the purchase. However, I am hoping to keep the home by reinstating the loan and then doing a refinance with cash out. Please advise if this scenario interest you as we can give you a hefty ROI on a short term investment. Thanks

    1Reply
  • Austin Ojimgba
    Lender · Member since 2018 · 59 posts · 14 votes
    7y

    @Christina Morales how much do you currently have as a Down Payment? and how many units? . If you’re looking to purchase or refinance Apartment/multifamily property — comprised of 5 or more units — in need of value-add rehab or currently turnkey ready, our Multifamily loan program is perfect for you.

    Our loan product is industry leading, requiring a low down payment, and the ability to roll fees and closing costs into the loan.For Value-Add opportunities Loan-to-Cost (Purchase): 80% Loan-to-ARV (Refinance): 70% Interest Rate: As low as 8.375% For Stabilized Properties Loan-to-Value: 75%

    Cash-Out Refi: Available (60% LTV Cap) Interest Rate: As low as 7.375%.

    This unique loan program provides you with the flexibility and leverage to capitalize on multifamily investment opportunities nationwide, whether it’s a value-add project or a short-term hold for seasoning purposes. I will be glad to guide you through the financing process send me PM so that we can connect and discuss further.

    2Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    7y

    @Christina Morales Welcome to BP. The buyers on a 7-unit I was a listing agent on recently in Bristol, CT used a hard money lender to fund their purchase. The deal was not in the $800k-$1M range, but maybe they can help or point you in the right direction.

    If you want their info send me a PM. The deal I was a part of was funded with no issues.

    0Reply
  • Nick B.
    Investor · North Richland Hills, TX · Member since 2013 · 1k+ posts · 1k+ votes
    7y

    You can definitely buy an apartment complex with a hard money loan. However your down payment will be higher than for a bank loan or Fannie/Freddie. HML would require 30-35% down or more in some cases vs. 25% for a bank loan.

    Also make sure the property can afford 12% or so interest payments. 

    This only makes sense if you're doing a deep value-add repositioning and can increase NOI and property value enough to refinance within a year.

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @Christina Morales:

    Hi! I am looking to invest in real estate, I am in CT where things are expensive. My goal is to one day buy an apartment complex. After doing research I am thinking if should I continue to save until I have enough to put down on an apartment complex rather than buy a bunch of multi families which in the end would cost the same amount down? 

    Also, if I were to purchase an apartment complex can I use HML to attain the property and use it as a down payment, then eventually refinance with a bank for better terms? I am unsure of how HML work when buying an expensive property, $800,000 +. If I could use HML to buy a property, then I could essentially get the complex sooner rather than later.

    I have good credit and some money saved, but nowhere near enough for a down payment on an apartment complex 800-1M. Looking for some input & guidance in financing world! Thanks for your help! 

    Why would you buy with a HML then refi to a regular loan? Why not use the regular loan in the 1st place? You would save a ton of money on fees.

    2Reply
  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    7y

    @Christina Morales This isn't a good plan...HML is an absolute last resort...how would this pencil out?

    937-979-7000
    Realize Multifamily Group11 Review
    View Page
    1Reply
  • Christina Morales
    OP
    Member since 2019 · 11 posts · 4 votes
    7y

    thanks for your input guys. I am trying to make moves too big for me then, I need to start small. I was hoping I could use HML as a down payment because I don't have it yet. Thank u!

    0Reply
  • Nick B.
    Investor · North Richland Hills, TX · Member since 2013 · 1k+ posts · 1k+ votes
    7y

    @Christina Morales, 

    HML lenders don't do 2nd position loans and don't loan more than 70% LTV in 1st positions.

    Banks (or Fannie/Freddie) won't allow you to have a 2nd position loan even if you find a unicorn HML that would give you that loan.

    1Reply
  • Diana Muresan
    Lender · Chicago, IL · Member since 2018 · 352 posts · 147 votes
    7y

    @Christina Morales HML is for short term financing not for the long run, also, down payment comes from seasoned sources, not another debt. And more importantly you need to have same net worth as the loan amount, if you don't even have the downpayment, I don't even understand the logic here. Also, you need to have landlord experience on MF in Order to get financing on a commercial multi unit. Best is to start with residential 2-4 units, get a few, build some net worth and experience and then move into the commercial MF.

    0Reply
  • Stephanie P.Pro Member
    Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
    7y
    Originally posted by @Christina Morales:

    Hi! I am looking to invest in real estate, I am in CT where things are expensive. My goal is to one day buy an apartment complex. After doing research I am thinking if should I continue to save until I have enough to put down on an apartment complex rather than buy a bunch of multi families which in the end would cost the same amount down? 

    Also, if I were to purchase an apartment complex can I use HML to attain the property and use it as a down payment, then eventually refinance with a bank for better terms? I am unsure of how HML work when buying an expensive property, $800,000 +. If I could use HML to buy a property, then I could essentially get the complex sooner rather than later.

    I have good credit and some money saved, but nowhere near enough for a down payment on an apartment complex 800-1M. Looking for some input & guidance in financing world! Thanks for your help! 

     You may be biting off more than you can chew, but your post doesn't have enough information.

    Do you have any experience with an apartment complex?  Do you own a home right now?  How much cash are you working with?  Can you buy out of state and get a property manager rather than buying in CT where it's expensive and you have to have cash to scale the cost?  We had an investor from New York buy in Indianapolis and his profit margin on a 5 unit is similar to a 2 unit while his cash outlay is lower by 3/4.  Take a look at less expensive properties out of state if you're short on cash, but want to proceed.

    Best of luck

    Stephanie

    1Reply
  • Hunter Ambos
    Real Estate Agent · Pickerington, OH · Member since 2017 · 55 posts · 26 votes
    7y

    Michael Blank talks a lot about syndication and using partners to get into larger deals. You don't have to start at 2-4 units if that's not the end goal. I don't have the net worth or the down payment but I'm raising money for the down payment + rehab and partnering with experienced people (who do have the net worth) and giving them a lot of the deal in exchange. The first deal isn't going to make me rich but it will give me the much-needed experience. I don't want to waste time with 2-4 units because that's not my strategy. I found a lot of partners by just networking and starting to look for deals through brokers and now cold-calling owners.

    1Reply
  • Oleg Shalumov
    Rental Property Investor · Teaneck, NJ · Member since 2016 · 567 posts · 291 votes
    7y

    @Christina Morales some banks does not like when downpayment is provided by HML ... but in general it is the right way of thinking. If you are good with finding Multifamily properties which are "cash flowing" you can partner with a person who could provide the money. It is a win-win as you get the money you need for downpayment, and the partner gets the part of ownership.

    0Reply
  • Steve Hall
    Rental Property Investor · TX · Member since 2019 · 303 posts · 364 votes
    7y

    @Christina Morales Welcome to BP!

    Impressive first post. Disappointing second post. It seems the responses given above have lead you to believe "I can't afford it." That's unfortunate.

    If you want a $1 million apartment complex, figure out how to make it happen!

    Forget about HML. That's for short term investors, like flippers. Can you think of other ways to get what you want?

    I'll get you started on some things to think about:

    1) Connecticut properties are too expensive and have low cap rates. Look for apartment complexes in other states.

    2) Seek out seller financing deals. Every seller is different; find one that is open to terms that work with your situation.

    3) Regarding not having a large enough down payment, have you tapped all of your resources: IRA, 401K, Life Insurance cash value, equity in your home, etc?

    4) Find other investors in the same boat, with the same goals, and go in on an apartment deal together. Owning 25% of a $1 million apartment complex is better than owning nothing, right? Plus it gets you MF ownership experience!

    Remember: never say "I can't afford it.", instead say "How can I afford it?"

    4Reply
  • Todd Dexheimer
    Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    7y

    Instead of looking at hard money, start thinking about how you can partner with others to achieve your goals. 2-5 people can get together with money to purchase a deal or you can syndicate a deal with several investors. Either way, you are giving away a portion of the equity, but you are able to get deals done. 

    Time to dig deeper, not give up and go smaller

    0Reply
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