Financing Options - 20 Unit MultiFam

[Andy Nichols]

I am touring a 20 unit apartment building this week that was just listed for sale. Decent asking price for a value add investment that is currently renting at 58% of market rates. Plan is to renovate unit by unit, shuffle tenants or find new, and have a 3 year hold.

I am a mid 20's recent college grad with a masters in real estate development, spent 2 years at CBRE, and now work for a commercial GC. I currently have no debt, but due to that am lacking assets/liquidity. I have a family member committing the down payment costs for an acquisition and construction loan. Operating agreement structure would be that I control all aspects of development, pay 5% on his money lent to me during 3 year hold and upon reversion, distribute 10% of proceeds back to him.

Is a bank going to loan on this set up? What requirements are they going to have? I was planning to collateralize the property due to lack of assets. Any other comments on this structure?