I want to invest in multifamily apartment buildings?

Question

I want to invest in multifamily apartment buildings how do I research markets to find a market where there is job growth, migration etc?

Let’s say an apartment building with multiple units has cashflow can I put down a downpayment, finance the rest as a non recourse and interest only loan with no personal guarantee needed as long as the DSCR is good like 1.25 or above even if it’s my first property and I don’t make a lot? Could I close this loan in a property LLC with just the property?

Steps for getting a commercial loan?

Michael Ealy · Answer

You will need to personally guarantee a loan - especially if it's your first deal - and I am assuming, you're not in a position to buy a 100+ unit apartment complex.

I own 1,000 apartment units and the way it works is that I acquire a building and qualify for a mortgage (with recourse). I stabilize it and only after I refinance at 70% LTV or lower do I get a non-recourse loan. And it's easier too wth 100+ unit apartment complex vs buying a 10 unit.

Marlen Weber · Answer

@Rick Martin excellent input. Thank you for the great advice.

Miguel Perez · Answer

@Bellman Tumasang

Search market cycles ex. Recovery & Expansion phase

Submarket trends ; emp growth, vacancy rates & more compared to National Average

Marcusmillichap.com

Irr.com

The milkenbest city report.com

From my understanding:

Fha loan non-recourse

HUD loan non-recourse - longer process to close so may hinder financing contingencies but can get ball rolling .

Inquire about their loan product and underwriting qualifications

Leverage using bank and/ or creative financing like  owner carrying 2nd mortgage

Or why not “Master lease agreement” read into it

Learn to analyze deals the importance of

Cap Rates, LTV, DSCR, C on C return and most importantly NOI!!!

“Acquisition Financial Spread sheet”

Actuals/Proforma underwriting process

Exit strategies on value add properties once NOI HAS INCREASED!!

Best of luck..

Eric Johnson · Answer

Hi @Bellman Tumasang , @Michael Ealy has a good point. I actually fund commercial property as my business.. so I know a bit about it.

You're looking at a small balance loan if it's anything under $750,000 LOAN amount (not purchase price), these are generally full recourse. Do not expect a non recourse deal. You can expect to put down 30% and you can close in an LLC (commercial lenders allow you to do this as it is normal).

Shoot me a DM and I'd be happy to get with you on email or a phone call to discuss the process. I hope this helps!

Eric Johnson · Answer

@Travis Williams hey travis feel free to connect and hit my inbox, thanks

Rick Martin · Answer

@Bellman Tumasang look at overall migration rates, like the one hear: https://public.tableau.com/pro...

Pick a city within one of those states and do a google search for population growth in that city. It will show you a trend line. Jobs are most likely driving that trend line, but head to the Dept of Numbers to look at, up to date, job numbers:https://www.deptofnumbers.com/... Census.gov is another resource, although a little cumbersome to navigate.

Get well educated, make sure you can form a team in that market, and align with individuals who are experienced in the space.

@Eric Johnson can guide you on loans, but you'll need a loan guarantor with net worth = to the loan amount, another individual with post loan liquidity = to 10% of the loan amount, and someone who can put up risk capital (EMD).

It is definitely a team sport. Don't go it alone.

Scott Morongell · Answer

@Bellman Tumasang debt will most likely be recourse. Only way you can probably get non-recourse is if you have someone else come sign on the loan that has multifamily experience, and net worth to satisfy the requirements as well as post liquidity. Recourse shouldn't scare you if you know what you're doing. Don't worry about LLC structures as your legal team will tell you how to navigate those areas. The census bureau has good info for market research. I highly suggest picking a market that you have knowledge in already or with some boots on the ground.

Alina Trigub · Answer

@Bellman Tumasang

Finding the right market(s) is certainly important. However if you have never invested in the commercial real estate, it is equally important to educate yourself on the process and build a team along the way.

Here's a guide for you on the latter:

https://www.biggerpockets.com/member-blogs/10850/85351-nothing-will-work-until-you-do-maya-angelou

Bellman Tumasang · Answer

@Travis Williams great to see I’m not the only one

Travis Williams · Answer

@Bellman Tumasang Awesome post and exactly my situation.

@Michael Ealy and @Eric Johnson is it possible for me to connect directly for your professional insight, direction and service?  Thanks for all assistance.

I want to invest in multifamily apartment buildings?

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