A bunch of newbie questions here..pls advise!

[Danny N.]

Hi all

I'm new to the multifamily space and have a bunch of newbie questions to ask:

1. Looking into out of state investing and planning to partner up with someone on the commercial side (5+ doors). I believe most agents/brokers will want you to sort out your financing first, but I think lenders will want you to identify the property first - seems like a chicken/egg situation. To me, it seems more logical to sort out the financing first with a lender. If so, does anyone know/recommend lenders that can service nationwide, or specifically in TX, FL or AZ?
2. On commercial loans, my understanding is the lender will underwrite the property's financials. However, since we're planning to come up with the deposit, what criterias will lenders look for in us, besides the usual (e.g. tax returns, paystub, liquid assets, DTI)?
3. Has anyone successfully used a SBA 504 loan to purchase multi-families? If so, could you please share the process and the pros/cons of it (besides its a recourse loan)?
4. The property will most likely be held in an entity (e.g. LLC) between myself and a partner - what are some key things to incorporate in the operating agreement (not in cookie cutter entity formations)? Or does anyone have a recommended reasonably priced attorney that could help with this?
5. While we've been speaking to some brokers/agents, wanted to see if anyone had recommended brokers in TX (San Antonio, Houston, Austin, DFW), AZ (Phoenix) and FL (Tampa)?

Would greatly appreciate any advice on this. Thanks!

[Senate Eskridge]

Danny

I would be happy to help, I will do my best to answer these questions here but it might be easier to jump on a call sometime. Feel free to send me a message if you would like to chat.

The first step in my opinion is to narrow down your buying criteria and area. For example, a 25 unit in TX is going to be totally different than a 50 unit in AZ.

Answers

1. 1. The multifamily business is all about relationships after you choose your area (see above) you need to start meeting brokers and lenders.
2. 2. My experience with commercial loans is the bank spends most of the time analyzing the deal, most commonly they use Debt Service Coverage Ratio (DSCR) or Debt Yield to analyze these situations. Once they are satisfied with the property they will look at the loan guarantor.
3. 3. My understanding is that most SBA loans are for owner-occupied business loans, I.e. if you had a restaurant they would help you buy the building. I am not an SBA expert but I know several I could introduce you to.
4. 4. I have used cookie-cutter operating agreements before, my recommendation would be to hire a lawyer for this I would be happy to make an introduction if you don’t have one already that specialized in real estate.
5. 5. Again, narrow down location and asset type first.