Questions regarding Financing Apartment etc. - Posted by whyK-CA

Real Estate Investing Apartments
1

Posted by whyK-CA on September 12, 2004 at 20:47:09:

Hi John.

Thanks for your post.

About the down payment, am I most likely find financing with 10% down?

Thanks.

whyK-CA

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Questions regarding Financing Apartment etc. - Posted by whyK-CA

Posted by whyK-CA on September 12, 2004 at 13:09:07:

Hi.

I’m just finishing up reading a book about buying apartment building. As I suspected, it is very different from SFH world (at least to me at this time.) Please help me with following questions.

  1. Is it substantially difficult, if not almost impossible, to create a deal with 5% down in apartment building financing? My FICO is 760.

  2. I have only one REI experience with SFH so far. No multi units. Will I have problem getting loan for, say 12 units apartment?

  3. The rental market is very slow in my area, while SFH retail market is still hot. Some of the apartment in my area where getting twice as much in those dot.com era. I see quite few ?gmove in special?h signs. But it appears that rent has been bottomed out for a while. (I need to confirm this somohow.) Is this bad time or good time to get into this market?

Thanks in advance.

WhyK-CA

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Re: Questions regarding Financing Apartment etc. - Posted by wes

Posted by wes on September 13, 2004 at 07:07:01:

If your seller will hold a second mortgage, you can easily get a 90% loan (total).

Lenders will “usually” only lend 65-75% of this type loan which requires seller to hold 15-25% to get to 90%.

Unless your seller holds a second, it is hard to find lenders that will go much higher than 80%.

Regards,

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Re: Questions regarding Financing Apartment etc. - Posted by scott

Posted by scott on September 12, 2004 at 19:27:50:

I personally believe this is a perfect time to start looking towards Duplex or Triplex investments. The trend that Ive started noticing and maybe you have too, is that many new investors are living in these duplexs as a way to off set the mortgage and waiting for the apreciation of the unit to continue moving upwards.The rental market is picking up and will continue to grow as different type of loans shake out the First Time Home Buyer.Careful of Cap rates ,that`s the real issue when investing vs purchasing SFH or townhomes.

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Re: Questions regarding Financing Apartment etc. - Posted by John

Posted by John on September 12, 2004 at 16:54:04:

Seller financing is more common with multi-unit deals. Lenders also
like to see some experience. Hence you will be both better off and
worse off.

You will only get experience and build a track record by trying. It would
help if the down payment was more then 5%. Consider a smaller
building (5 units rather then 12).

The rental market pricing show reflect the slow rents. I know in the
Portland area this is not really the case as people are looking to use up
the cash they have. Hence rental market is slow but the yields are still
low (and therefore the prices are high). It might not be the best time
unless you find a great deal. As the investors in this sector are more
professional be careful if you think you have found a deal that no one
else has noticed. Maybe you have and maybe the seller is getting a
better deal then you realize.

In the SFR market the values are driven by the owner occupiers and
they sellers are not always motivated by best price when selling. Hence
the can be bargains or over pricing because the investor sector is not
dominant.

John

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Re: Questions regarding Financing Apartment etc. - Posted by whyK-CA

Posted by whyK-CA on September 12, 2004 at 20:22:04:

Hi Scott.

Please help me clarify this.

In apartment investment(5 or more), I understand that Cap Rate, cash ROI, total ROI and DSCR are all important ratios to pay attention to. The lenders are gonna want to know that too.

Do you analyze 2 to 4 units properties the same way? Do lenders use the same criteria? ( I thought up to 4 units, the lenders use the same process as SFRs…)

Thank you for your time.