Commercial Financing Question

[Steven Barros]

Hello BP, 

I have been looking at small apartment buildings 8-15 units in various cities around the country. I would like to finance the most that I can since I am young and have time to leverage my money. Is it possible to leverage 90% LTV? Are small local banks a good source for commercial loans? I would like to still get a reasonable interest rate.

looking for advice on what to expect when looking for loans. 

Thank you!

[Joshua Fulenwider]

@Steven Barros 90% on a commercial loan may be difficult to get especially if you are also trying to keep the interest rate down. Banks price based on risk. The lower the down payment the more risk there is to the bank so they like to get compensated for it. That being said, they are not impossible. Really strong borrowers I have seen get financing through insurance companies at 90% LTV with favorable interest rate. This is not available to most borrowers and they prefer looking at larger deals, at least in my experience.

Right now the best I have seen is 80%-85% LTV with a lot of banks being at 60%-75% LTV.

What I think will help you is if you define your geographic region and then cultivate relationships with banks in the area in which you invest.  A lender is much more comfortable lending on a piece of property they can see every day than one across the country.  My experience has been small community banks (typically under $1 billion in assets) are more suited to tailoring products to fit the needs of their communities.

Hope this helps.