Financing Apartment and Multi-Family Building Investments

The most important issue to remember when looking for a commercial mortgage broker to work with is to remember that the commercial mortgage application, underwriting and approval process is entirely different for commercial mortgages than residential.

For example, the most important aspect of the borrower, as seen from the lender’s perspective, when applying for a residential mortgage are the borrower’s personal credit score and personal (DTI) or debt-to-income ratio. In contrast, when qualifying for a commercial mortgage, the borrower will find that the lender will look at the property first and the borrower second.

In commercial financing, the personal credit score of the borrower will matter less than the income and expenses of the actual apartment building. This concept can be confusing for the first time apartment building buyer.

Commercial mortgage financing is a highly specialized area of the finance industry and therefore the first time investor should spend some researching and interviewing various mortgage lenders who specialize just in commercial mortgages.

Many first time commercial mortgage investors are tempted to call the mortgage broker who helped get them a loan on one their primary home or perhaps even on some residential investment properties. This can be a huge mistake because where as that mortgage broker might be extremely knowledgeable and trustworthy when it comes to residential mortgage financing, his or her knowledge and abilities in commercial financing could be extremely limited. This could wind up costing you thousands of dollars or even missing out on a deal because you weren’t able to find the right financing.

A good commercial mortgage broker will have access to dozens of direct lenders, banks and insurance companies who specialize in lending on apartment buildings and other commercial real estate.

A reputable commercial finance broker will even help you analyze your properties to determine their worthiness as long term investments. In addition, the commercial broker will prepare your financing package for the banks and lenders in an organized and professional manner. This prevents your loan scenario from landing at the bottom of a pile on the underwriter’s desk because it wasn’t prepared correctly.

You will need to have the following documentation in order to pre-qualify for a commercial loan on your multi-family building:

1. A personal financial statement dated within the last 60 days.

2. A tri merge credit report dated within 60 days.

3. A full 1003, including a real estate owned and all assets.

4. The last 2 years and year to date income operating expense statement for the property.
If last 2 years not available then I need the last 2 years Schedule E from the seller on this property. The last 2 years income operating and expense reports plus year to date reports if owner occupied purchase.

5. A copy of the rent roll dated within the last 60 days. Signed and dated
by both the borrower and the seller. The rent roll must state an as of date. Please make sure the rent roll has the tenant name, unit number, rent amount, square footage, lease start and lease expiration date. If property is a mobile home park, please make sure that the pad and the trailer rental amounts are separated.

6. A copy of the purchase contract.

7. A brief summary of the loan requested and your contact information.

8. A resume on the borrower.

9. A few digital color photos of the property.