Posted by Ed Garcia on March 07, 2001 at 09:30:01:
Fred,
The two you just mentioned are a must. Also because were investors, we can demonstrate to the bank that we have purchased the property with built in equity. In some cases if the property is commercial or multiple units, I can show the bank that the property has below market rents and is a candidate for rent increases which will increase the value of the subject property as just one example. Upside can be demonstrated to the bank. It’s important that the bank sees what I see in the deal.
Most of your mortgage companies on 1 to 4 units will allow you to do a 95% CLTV in just about anything. I say that because the majority of mortgage companies have sub-prime outlets, or sources.
Is it possible to do leveraged buyout on larger (10+ units) apartment buildings where bank does 70% 1st and seller carries 30% 2nd?? It’s been done on smaller (4units and less) but will lenders lend if you have no money or very little of your own on the bigger buildings??
Re: financing apartment buildings - Posted by Ed Garcia
Posted by Ed Garcia on March 06, 2001 at 19:34:40:
Todd,
Sometimes answering these questions can be misleading because the viewer either thanks that it’s easy to do, or if they can’t do it, they think your lying.
To do as you are asking and that is basically 100% CLTV (Combined Loan To Value)I have not only done this type of financing in the past. But I’m currently doing it now. I don’t want this to sound like a walk in the park, but yes it can be done when you know what lender to use, and have a working relationship with them. Usually they will be a portfolio lender who keeps the loan. You have to understand their underwriting criteria and know how to and when to make compensations for lack of down payment on a deal by deal basis.
A National lender or a lender who sells their loans in the secondary market will want the T’s crossed and the I’s dotted. They will have a package two inches thick and usually will not deviate from their criteria. What makes us good in this business is to know which of the rules of various lenders can be compromised, or compensated in another manner. I promise you this is not always an easy task.