Qualifying for Small Multifamily Loans

[Kyle Souza]

From this groups experience, what sort of "gut checks" do I need to make to make sure I will qualify for debt on my first Apartment Acquisition? I am working with a partner but we are in our late 20s, loan sizes are probably under $5M. Is this feasible for us to qualify? And if not, how can we mitigate roadblocks?

Thanks!

[Kenneth Reimer]

@Kyle Souza A couple quick and fast tips on qualifying for multifamily loans are having enough experience in the eye's of the lender, a 1.3X DSCR (using lender underwriting..not broker's underwriting), and a net worth equal to or greater than your loan size. I'm not sure how prevalent that last one is these days, but I've been asked to prove it in the past. Ultimately, your ability to get a multifamily loan is going to hinge on the property's ability to support its own loan. This is the main difference in commercial vs residential. Commercial loans are pretty much DSCR loans by definition. Further, you'll need to ensure you get the proper insurance, and that has been more and more difficult in recent years. Oftentimes, we see inexperienced buyers missing key sticking points with insurance companies, and it derails their purchase. For instance, not knowing what type of panels are on the naughty list in the eyes of the lender will trip you up during a DD period if you haven't underwritten your line item expense of replacing them. The buyer finds out too late into a DD period that the insurance company will require the panels to be replaced, and the buyer ends up trying to negotiate with the seller. Just one of the many hiccups that can occur when a buyer doesn't work with an experienced multifamily broker that understands the potential pitfalls, how to avoid them, and most importantly, what a good deal looks like.
Happy to chat further if you have questions Kyle! DM me if need be!