All Forum Posts by: Darryl Dahlen

Why is your credit sub 600? It would seem that that needs to be your focus. Once you get it to where it should be then you should have plenty of options. I don't know how or where you'd get a commercial loan on a O/O SFR, but even if you could, your credit score would still be an issue.

Pre-qualification lenders are not the norm on the commercial side. Since a commercial loan is primarily based on the property and it's financials a lender can't pre-qualify you for a loan. They need to see the rent roll, profit and loss, and historical financials to determine their interest. Yes, they'll look at your financials too, but that's to ensure your global cash flow/DTI is safe so that your personal guarantee mean something.

On a 6-unit, the loan process isn't all that different than say a 4-unit other than the focus is more on the property. The paperwork is a bit more involved as is the focus on variables such as vacancy rates, expense ratios, etc.

The big difference is really how the crunch the numbers to ensure the DSCR work compared to using DTI on the residential side. Banks vary, a lot sometimes, on how they underwrite a file and the numbers they want to see on their side. Their terms can have a big impact on this as well as a loan based on a 20 year amortization has a big impact on the DSCR compared to a 25/30 year amortization.

Are you looking for votes or simply to try and show your financial prowess here? Freddie blesses the loan before the borrower officially engages the lender so I don't know what you mean by "significant risk going down that road". The agency lenders, or at least the ones I use, present the loan request o the local Freddie field office to get their input so that all the cards are on the table, including anything that may not meet Freddie's guidelines before they issue a term sheet.

I have had an exception, or two, on every Freddie loan I've done, but again, those were granted before the term sheet was issued except in one case where there was some deferred maintenance issues that were present in the property condition report, but Freddie granted an exception as the work could be completed inside of 90 days.

Your comment about the sales broker is a separate issue.

The loan amount is the realm of local banks/credit unions. They can offer good terms with low closing costs. Some of the players in the small balance world are Wells and Chase so see if there is one of those local to the property.

The program can be flexible. I've closed a loan under that program where the borrower had what I'd call weak net worth, but Freddie liked the property, management company, and the borrower had the decent post-closing liquidity.
Like a lot of loan programs/lenders, it's not an "all or nothing" process, but it takes experience to know the lay of the land and ensure that you're putting square pegs in square holes.

The good news is there are some programs where you don't need a net worth equal to the loan amount. Freddie's SBL program is a good example, BUT that's not to say you can be weak financially. 

You can syndicate funds to raise the down payment, and I've gotten around weak sponsor financials before by raising additional funds that are held be the lender as reserves. Then, you need to ensure you have someone on the guarantor side with experience owning similar sized assets. Freddie can overlook this somewhat if you use professional management, but if you're working with banks you're fighting not only the experience component, but the net worth requirement, AND being an out of state investor.

Point being, it's important to know now only what you can buy, but who you're going to use for financing as you need to consider what financing hurdles you'll encounter. If your likely price point is less than 1MM than banks are going to be the best players, but they can also have high barriers to entry with regards to liquidity/net worth and who they'll lend to.

Emails sent.

One of my long-term clients is selling their 32-unit multifamily property located in Dallas, TX. I provided the initial loan for this property and one refinance 2 years ago so I know the property well. At this point, the property is truly off-market, but it won't be for long as the realtor is working on the offering memorandum now.

The owner has given me the green light to try and find a buyer so in addition to sharing this with my other clients I thought I'd post it here as well.

Highlights of the property are:

• 100% occupied
• All but 2 units have been renovated
• Many upgrades have been done to the property totaling over $350,000 in CAPEX
• Nice location
• The property should qualify for agency financing (5,7,10 year term with 30 year amortization on a non-recourse loan and 75-80% LTV). I/O and adjustable rates also available
• Still some financial upside as the owners pay utilities, water, and cable

Asking price is $1,900,000. 

2015's NOI is: $101, 446 and annualized 2016's (using YTD financials through Sept) NOI should be: $120,576

I have financials and rent roll for the property as well as property info/photos if anyone is interested. My fee is 1% for either financing the property or as a finders fee if you finance the property yourself. A signed fee agreement will be needed in order to proceed.

Since I know the owners, in an effort to not jeopardize my relationship with them or the realtor whom I also know, I will vet anyone who is interested to ensure you have the experience and financial ability to buy the property. 

PM me if you are interested, agree to my fee, and are willing to disclose your financials and experience.

If a loan takes 90 days to close something is wrong. The lead time to gather the necessary docs to start the loan can be slow, but once you get to the point where the lender orders the 3rd party reports you should be looking at a 45 day(ish) close time. 

There is nothing wrong with getting a 5+ unit so long as you are ready and have laid a good foundation. By that, I mean you have a solid property management company lined up, have an accountant, and have a good understanding of the subject market(s) that you are shopping in.

Nothing wrong with 4-units, but there is something to be said about the economics of scale that buying more units gives you.

As to if commercial loans are hard; I don't think so, but they ARE more involved, but I don't think that makes them harder so long as you are fishing in the right pond with regards to your capabilities.

Ditto what @Joseph Gozlan said.