Commercial lending on $4-5M property

[Ian Skjervem]

Hello! 

I'm considering the idea of getting in the market for a $4-5M, 20th century apartment building in Brooklyn, NY. I have experience with multi-family on a smaller scale. I'm looking for guidance on how the commercial lending process works in comparison retail mortgages. 

What should I expect to put down? 20%? And is there any path to a lower down payment using creative financing, or is 20% pretty much what it is? Is there any difference in product/rate if the building is owner occupied? What does the contingencies process look like ? For anyone familiar with the area, what would be a reasonable amount for annual repairs to build into a model? Are lenders going to care about amount of experience with this type of deal in terms of preparing a fleshed out model, or is it similar to retail in the sense that much of the process is managed? Is DTI relevant in these deals, or is the only metric DSCR?

Appreciate any help. 

[Thomas Santella]

Depending on the seller and their interests/desired exit, any down payment or terms is negotiable if they are open to seller financing. If you are getting a loan for any part of the purchase, typically if it is owner occupied you will get more favorable rates. It would be difficult to provide a reasonable amount for annual repairs without knowing the size or unit count of the building, but I know if you had to renovate a unit or the building, the investors I work with use $120-150/sqft depending on the extension of the renovation project and how high-end finishes you would use. Lenders most definitely look at experience to determine whether they will even lend to you or not, and will ask what type of similar experience you have and may even ask for proof. If you don't have experience at that level, they might even ask you to bring someone on to the project that does. Easiest way to find out is to get on the phone with one to find out. From my experience, DTI is more used for single family homes and primary residential housing. For this property, you would be wise to incorporate the income from the other units against your debt service to make the property more attractive to lend on. If you would like to speak further just connect! I am a realtor in Brooklyn and Long Island good luck with everything