Rental Portfolio opportunity

[David Bayon]

We (my wife and I) just submitted our first offer and it's a bigger deal than we would have expected for our first one. We made an offer on a rental portfolio (14 properties with 95 units). We are doing a JV with my brother in law. Our offer is in for $800k and we have a great shot and getting it accepted according to our RE agent that connected us to this seller. It's an off market deal. The portfolio is cash flowing $21k per month now with a 10% vacancy rate. The seller is retiring and wants to move to FL and build/sell a few houses down there and he needs the cash to do so. The seller is also currently managing the portfolio himself and he is getting too old to deal with it anymore. Motivated seller = great deal (Cap rate is 20% before property management fee, which we will hire for sure and already have a lead on).

We (my JV: my brother in law and us) have $200-250k to use as a down payment, but we will need to find commercial loan financing for the balance ($600k if our offer is accepted).

I'm looking for some help with the best route to go for the commercial loan? We are hoping to have an accepted offer in the next day or so. My RE agent believes the seller will accept.

This portfolio is in Michigan (we live in Grand Rapids and the portfolio is over on the east side of the state -Bay City, MI).

I have already received some great advice from a mentor about going to smaller local banks to look for the loan.  We plan to present the deal to 5-10 banks.

We are new to REI in general so I don't know what banks loan against for a portfolio deal like this. My brother in law and I would prefer not to bring our personal (or business, he is a small business owner) finances into the equation if possible. Do banks loan against MV, cash flow, etc...? What are the best banks to do this with considering we don't have any history behind our RE business (we literally just started our business 6 weeks ago)?

Any help or direction would be greatly appreciated.

Thanks,

[Brie Schmidt]

I would strongly suggest pitching banks with the deal asap.  You will need to provide them with the property performance over the past 1-2 years and show them you have done your due diligence on the numbers.

You will also need to show them your track record and ability to manage the asset.

Read this guide, there is a whole section on commercial lending

http://www.biggerpockets.com/renewsblog/2013/06/21...

As fas as the PG - If the loan is under $1 million it is hard to get non-recourse. Just make sure the OA for the LLC has all the liability protection in it.