Personal Finance, Loans & Insurance

If you are looking to obtain financing or a loan for your apartment building – there is critical information you must know about how to obtain an apartment loan before venturing out to get one.

Apartment loans on income producing property are generally available at 80% of the value of the property, or Loan To Value (LTV), or the largest amount dictated by the property’s Debt Service Conversion Ratio (DSCR). The DSCR is similar to the Debt-To-Income Ratio used to qualify a residential home loan. The DSCR determines whether, or not your apartment building will qualify for financing from the lender, or in other words, whether the income will cover the debt.

Properties in only “fair” or “poor” condition may not qualify for apartment loans or will require a larger down payment. Units you’re considering should be in generally good condition and have little deferred maintenance. You may even consider refinancing your current apartment loan to get a lower mortgage rate.

There are many types of financing programs available including: non-recourse loans, apartment mortgage loans, joint venture real estate, commercial equity loans, commercial rehab loans, and structured financing.

Banks, and lenders have different minimum and maximum loan amounts available for borrowing, along with a variety of loan programs for you to choose from, which you should carefully tailor to your specific needs, along with other specific needs such as repayment terms, interest only terms, pre-payment penalties, and the time required to close your loan.

Apartment loans require a lender, or broker experienced in multi family and commercial real estate financing. There are a wide variety of lending options for apartments; small apartment programs for multifamily transactions from $1 Million to $5 Million, mid-balance apartment programs for multifamily transactions from $5 Million to $25 Million, and large apartment programs for multifamily transactions from $2 Million to No Maximum.

Apartment loan carry backs are becoming increasingly popular in today’s environment, as nominal interest rates on apartment loans increase by comparison to the bargain financing available in recent years.

Programs are available on fixed and variable rate financing on 5 or more units as lenders want your apartment loan business and are willing to compete on apartment financing rates and terms to get it.

Of course, terms and rates vary and loan rates currently run as low as 5% while apartment building loan terms can run from 25 to 30 years fixed for apartment buildings and multi family real estate loans.

Apartment lenders all have different requirements for such things such as property type, presentation format, location and quality as well as the minimum and maximum apartment loan amounts they will consider.

Types of Apartment Lenders include: Fannie MAE, Freddie MAC, FHA/HUD and more. While services include in-house processing, underwriting, and the structuring of the most complex funding requests. Also, the right broker can get you access to private lenders, who also do various types of commercial, and apartment loans, including the more creative financing loans that you may need on a particular apartment acquisition.

Additionally, an experienced broker can protect you from the unscrupulous fake lenders out there, who ask you for a large up-front deposit, and then never approve your loan. Their sole business is collecting deposits, and then providing you with a false reason why they could not approve your loan. They then state that your deposit is non-refundable. By this time, it is almost impossible to retrieve your funds, and would be very costly to pursue litigation, which is what most fake lenders who do this are counting on.

However, with any legitimate bank or lender, you will need to provide a small deposit of usually not more than $3,500.00. This fee covers the appraisal which the lender will have to order, and the document processing of the loan, which can be very extensive, depending on the size of the apartment you are acquiring, and will usually be credited back towards your final closing cost.

It is also very important to make sure that you do your due diligence as it relates to your financial analysis on the property. Be sure to use the actual net operating income and expenses whenever they are available, as opposed to the projected net operating income and expenses, which is what some sellers will provide to you, in order to make the property appear more enticing to you the buyer.

Loan-to-value percentage rates on refinance and construction are usually in the 75%-90% range. Loan approval will be subject to property appraisal, title review and specific loan program financial requirements. Again, apartment buildings are most frequently financed at 80% of value or cost (whichever is lower) and may or may not require recourse (personal guarantee.

Remember, lenders need to loan you money in order for them to make money, so they are motivated to help you acquire your property. They will work with you to close your loan, but an experienced broker may be able to protect you from possible loss, save you money, and negotiate a better deal on your behalf due to his experience, and previous working relationships with the lenders he brings deals to, because of the volume he may bring to a specific lender. This is an important consideration as you decide to move forward.

In preparing for your new apartment building loan, here are the essential documents that you will need to provide to your lender or broker, in order for them to give you a pre-approval on your apartment loan.

1.) You will need to provide a completed loan application;
2.) You will need to provide a tri-merged credit report. (tri-merged means all 3 credit reporting agencies will be included on the credit report)
3.) You will need the most recent 2 years income and expenses on the apartment building you are looking to acquire; and
4.) You will need the rent roll. The rent roll is just a list of all the present tenants in the building, what units they occupy, and how much monthly rent they pay.

Armed with these documents, you’re ready to get your apartment loan pre-approval within 48 hrs. from the time you provide your broker, or lender with the above listed documents.

Good luck, and make sure you find a knowledgeable mortgage professional to work with you on your acquisition. This will save you time, money, and headaches. It could even keep you from making costly mistakes that could cause you to throw valuable money down the drain.

So, If you are looking to acquire apartment buildings to build your future wealth, and acquire financial freedom, there has never been a better time than now to get started. Take action and prosper!

Let’s face it, Banks are just not lending.  It does not matter that they received over $350 billion of your money with more to come.  It does not matter how strong your business is or how great your credit history.  They just are not lending.

Most financial institutions have pulled back credit to businesses.  Nearly every well known financial company has stopped offering business programs – be it business credit cards, trade and supplier financing, commercial loans or working capital lines of credit.

These establishments cite poor market conditions and unfavorable economic outlooks.

The quandary comes when businesses, facing the same market conditions, are looking for ways to survive and in some cases grow.  In the past, healthy, established businesses could always turn to their banks for needed financing; be it for a short term line of credit or to restructure existing debt; freeing up needed cash flow.  Just not so today – especially since part of the blame of our economic toils rests on the shoulders of these same banks.

So if businesses cannot fall back on their bank or other financial institution, what are they to do?

The only real viable financing option for many businesses in this market is private, non-bank lenders.  I am not talking about equity capital or private placements.  I am talking about investors who have pulled their money out of a falling stock market and are looking to lend it to solid companies in hopes of substantial interest rate returns.

What is this you might ask?  There is always a struggle between supply and demand and the arbitrage opportunities that open to investors who know where and when to look.

A few years ago, banks and other financial institutions were lending at rates below or at market level in comparison to potential opportunities – they were offsetting lower returns with fees and deal structure (e.g. ratcheting rates). This left most private investors out of the lending market.

Today, banks are not lending and investors are taking their place.  If banks are not lending and businesses need capital – there is a funding gap. This funding gap is wide and does not have many players or competition.  Further this gap has huge barriers to entry as capital to invest is not easily obtained or easily given away.  What I am saying is that some very smart investors have realized that there is an opportunity here for them to earn substantial returns from lending money to proficient businesses and their owners.

Thus, they are filling the gap left by banks and remain the only real source for business capital.  But, they will only do so at very high interest rates.

What I am trying to say is that there are non-bank lenders that will fund companies.  But, the power (thus the arbitrage) is in their hands – not yours  – making your ability to receive funding both hard and costly.

The products they offer come with high interest rates, huge fees, and deal structures that are extremely favorable to them.  These lenders want to see strong (very strong) credit histories, low debt-to-income ratios, and very high repayment abilities.  Additionally, should a business have collateral, the property (equipment, machinery, inventory, A/Rs, purchase orders, sales receipts, etc) must be valuable and easily saleable.  Gone are the days of 80% and more loan-to-values.  Most of these lenders will only lend 50% to 60% against such collateral – especially if it involves a cash out or cash advance option.

Now, I know this does not seem fair – but what is fair in this market?  Banks are not lending – businesses need money.  You and your business must either take what it can get or get nothing.  These investors – the only entities that are still providing money to businesses – could also stop lending if they feel the returns are not there.  Then, there would be no business funding at all.

Private investor lending or advance options include:

Accounts Receivable Factoring, Purchase Order Financing, Business Cash Advances, Equipment Loans & Leases and Personal Loans.  There also remains a few investor back lenders that will finance the acquisition of a business (without real estate) – all provided the business is cash flow positive, has excellent credit histories (both owners and business) and can provide adequate financials and tax returns to prove it.

Just remember – these are not cheap and by no means easy to obtain – you and your business must still demonstrate a willingness and ability to repay these loans and advances as well as provide (in most cases – Business Cash Advances do not apply here) collateral values that are very favorable to the lender.

But, if this is all that is available – when banks and other financial institutions are not lending to businesses – private non-bank lenders may just be the answer you need to get you though.

Business finance money is a necessity for the beginning small business as well as the large, thriving corporation and practically every type in between. Every company has to address the issue of where they are going to financial resources they need to maintain their operations. A brief consideration of the question yields at least three primary answers to the dilemma that most businesses will face. It should be instructive to highlight these ways briefly so that you have a better idea of what is involved.

First, one of the most obvious ways bigger companies obtain financial assistance is through selling shares in their companies on the stock exchange. This also called equity financing. This option not only handles some of the pressing monetary needs of the company by receiving money from each shareholder when they purchase shares. Each shareholder then has an interest in the company and is paid interest the shares they bought. This interest is called dividends.

Businesses can also use debt financing. This method is simply another way of saying that you must seek business finance money by borrowing it from outside financial institutions like banks and credit unions. This form of financing is common with businesses of all types and sizes. A business will most likely some sort of loan to in the beginning since useable capital may not be readily available to the investors, entrepreneurs, or proprietors. Debt financing via loans is by far the most common of all types of financing. There is another type of debt financing that is not always considered when search for business finance money.

Debt financing can involve the issuance of bonds. While bonds are similar to stocks that are issued by companies, bonds are counted as liabilities to the companies since they are like getting loans from investors. At the same time, investors are the ones who typically choose bonds since they are less risky to invest in than stocks. Bonds provide a set interest rate that is paid to the investor while the principle is protected even if all else is lost to changes in the market. Basically, the company issues a set number of bonds and if all are purchased, they get that money up front to use for the pre-determined purpose then they will have to pay the investors back for their assistance.

These methods of financing are the basic three methods used by most companies to obtain business finance money, but with some risk involved.

Small business finance acts as a stepping stone for the small businesses, to explore innovative and holistic approach of business to increase their profits. With small business finance borrower can minimize the difficulty of funds that the borrower comes across during the business.

Small business finance depends upon nature of the business i.e. new or seasoned business. Amount fetched through the small business finance can be used for various purposes like buying a land, furniture, raw material, advertisement, machinery, outgoing expenditures etc.

Depending upon the borrower’s requirement he can either opt for the secured or unsecured loans. If the borrower wants to enjoy the attractive features and larger loaned amount then he should opt for the secured small business finance, but for that he has to place some valuable collateral against the loaned amount.

Borrowers who are looking for small amount can opt for unsecured small business finance. Unsecured small business finance is often availed by those borrowers who are unable to place collateral against the loan amount. Tenants or non-homeowners can avail the unsecured business finance at the competitive rate of interest.

Small business finance can be accessed from various lenders like prominent banks, institutions, lenders. With these, nowadays small business finance is also available through the online market.

Online has proved to be a simple and the fast method of acquiring the small business finance. While opting for the small business finance borrower must not forget to compare the quotes of different lenders in respect to repayment period, lower interest rate, and the loaned amount.

Borrower with bad or poor credit history like CCJ’s, bankruptcy, defaults, arrears IVA, etc can freely opt for the small business finance.

The most important task to obtain small business finance is preparing a business plan. In small business finance, business plan provides the borrower to know what amount to be raised for his business.