5+ Unit Commercial Lender

[Shahn Sattar]

Hello BP,

I am looking to get pre-approved for a 5+ unit property and wanted some tips/recommendations on what to look for in a commercial lender. If I'm looking in multiple markets, should I look for smaller lenders in each of those markets or one just one that can lend in all 50 states? Im open to any and all information you are willing to share. 

I've already been pre-approved for a 1-4 unit property, but I've missed out on a couple of smaller commercial multi-family properties and I'd rather that not happen again. 

[Nick Schoch]

There isn't a consistent pre-approval process for 5+ commercial multifamily like there is for 1-4 unit financing. 

I would estimate your expected maximum loan based on how much equity you have. If you expect to borrow less than $1 million, you will not be able to access agency capital. Instead, you will need to look for banks and credit unions. Most lenders aren't thrilled to lend less than a million on commercial transactions. As such, your pool of lenders will be smaller than if you were looking to borrow more.

I would contact a few banks, specifically those that lend in the markets where you are looking to buy. I would also contact some credit unions. If you aren't having much luck, there are always private capital/hard money options but they come at a higher price that likely kills your return.

After contacting the banks and learning about their programs, continue your property search. Once you have a target property for purchase, contact the loan officers you spoke with and ask for an LOI or Letter of Intent. An LOI is a term sheet that will spell out the salient business terms for the proposed loan such as rate, term, amortization, fees, and prepayment premiums. Again, you need to have a property in mind. Commercial property isn't so consistent that they can provide an LOI in a vacuum.

Good luck. Feel free to reach out with questions.