Thread: HOW DO I get multi family apartment loans?

for multifamily loans they are in general going to require 20-30% down. Maybe if you were making 500k a year it might be different.

Even a duplex would be difficult. In the current lending environment pretty much you can buy a house.

My advice would be to buy a 3 to 4 bedroom house and rent out the rooms you do not occupy. Hopefully you should be able to cover your mortgage. Then start saving for your next purchase.

Thx for the info. Is there a chance of borrowing the 20-30% down payment from another source. Then making payments for both loans with the rent I make.

Okay, with the subject line being said, you are really behind the 8-ball, as it appears that you have NOTHING to show the lenders. Too bad you are about 3 years too late, for 3 years ago, you could have recieved 125% financing, which is really 100% of the purchase price, by walking into any lender's office. Now, it is QUITE A BIT HARDER to get a loan, even if you have pristine credit.

Why do you want a 4-family? If you are going to get into multi-family units go BIG, get a 12/15/25 unit apartment building, that way you are now dealing with COMMERCIAL financing, where now the performance of the asset plays a role in getting financing. In addtion, property owners of commercial units expect to carry back some financing, if not all, and that is an added plus.

As for getting an non-recourse loan, good luck... Especially on a residental loan... They are more seen in commercial lending, and again it is because the building usually will support the loan, with the proper management, which does play a part in getting the loan too.

You know what I would do... Get into a SFR, I mean they are giving those things away, maybe a duplex... Get some experience, and then go to the larger units. It will help you learn the ropes as well as get creditability. If you want to jump into the larger units, partner with someone... Just don't get into the smaller units, since under 12 units, and they are too small to have a on-site manager, and having a 12+ unit building allows for one or two units to be vacant and not cause too much of an impact to the bottom line to give you -CF.

It is late, maybe I will add some more later.

Hope this helps!

Thank you Michael. I really appreciate experienced people sharing their knowledge. I was also wondering if a bank would loan me a huge 100% or so if I gave them some equity from the property..? Probably sounds like a crazy thought.

Please answer this silly question. You can see I don't know anything at ALL about the real world. If I wanted to buy a house for $200,000 and the bank loans me 80% or less where do I get the other 20% or $40,000. Does somthing change because its residential or because its a lower amount or if I was a first time buyer..

How much equity can I take from a property that Im still paying off?

Say I own a duplex and I pull equity to buy another duplex and keep doing that..Is that logical..can it work?

Say I own a duplex and I pull equity to buy another duplex and keep doing that till I have enough equity or assets to get financing for a large 12 unit apartment building..Is this logical also?

Does commercial lending have better options than residential?

Hope somebody replies to me rambling about stuff I don't know. Let me know if I'm way off the ball in crazy town.

Originally Posted by AmpChamp

I was also wondering if a bank would loan me a huge 100% or so if I gave them some equity from the property..?

Banks are in the lending business, they have NO INTEREST in real estate... It is just the thing that is use as collateral. Besides the banks have enough inventory as it is, they certainly do not want more on their books. (Please view my blog on how banks operate: http://www.thereitrainingwarehouse.com/wordpress/?p=44 to get a simple view.)

Now if you are looking to get funded by a venture capitalist, then that is what they are looking for... A piece of the PIE, though sometimes their piece is very large, if you are "there for the ride" [no experience])

Originally Posted by AmpChamp

If I wanted to buy a house for $200,000 and the bank loans me 80% or less where do I get the other 20% or $40,000.

Well, that is a subject for a training seminar. The answer to that is very complex, as there are literally hundreds of ways to create the deal, what is the seller is looking for, what type of terms are on the existing notes, etc. The simple answer, and what most people think, when asked that question is from a savings account. Now I have purchased countless numbers of houses for NOTHING, some I had to pay a few bucks, and when I started my RE career, I was like most, where I came up with 20% down (gawd, I'd shoot myself if I ever went back to that.)

Honestly, you would need to give me the details of the seller and your goals, so I can't answer that question, though since I am getting A LOT of similar questions like that one, I am writing a training session on the subject. I will let you know when it is complete. (Now I am not looking for an excuse to charge people for simple answers... Truly to answer your question, it is already up to 50 pages of PowerPoint Presentation Slides, and really only have the groundwork and half of the techniques set.)

Originally Posted by AmpChamp

Does somthing change because its residential or because its a lower amount or if I was a first time buyer..

There are tax credits, where you can get back 10% of the purchase price ($7,500 max [I believe]) as a first time homebuyer. Check with the IRS on that one, Mr. Obama is changing it all the time.

Originally Posted by AmpChamp

How much equity can I take from a property that Im still paying off?

Usually, you can take up to 80% of the house value (leaving 20% EQ,) but with all these REOs, the lenders are probably changing their tune with that as well. I am hearing that lenders are closing off open HELOCs even though there is plenty of EQ left.

Originally Posted by AmpChamp

Say I own a duplex and I pull equity to buy another duplex and keep doing that..Is that logical..can it work?

It could work, but you have to make sure that when you pull out the EQ, that the duplex supports the new payment. I knew someone that kept refinincing "EQ" out, during the lender's "insanity days" and what used to be a $215/m payment turned into a $790/m payment, the only thing was they could only get $650/m in rent. Sure they had their money, but fell into FC soon after. You have to make sure that it makes sense... Remember it is a business, it is HARD WORK, and it is not easy money (if it was everyone would be doing it.)

Originally Posted by AmpChamp

Say I own a duplex and I pull equity to buy another duplex and keep doing that till I have enough equity or assets to get financing for a large 12 unit apartment building..Is this logical also?

That is one approach, but not a very wise one, but an approach that many take. Commercial lending is totally different than residential. Different due diligence, different rules, different, different, different. You fist need to understand WHAT YOU WANT in life... Do you want to own Duplexes? SFRs? Apartments? Retail Space? Industrial? I mean, RE is just a mean to your ends... So what is your ENDS?

Originally Posted by AmpChamp

Does commercial lending have better options than residential?

Better? That is realitive. Generally commercial offers more options, as they are owned by investors, not homeowners, therefore they know that getting CASHED OUT is not the norm (as in residential.)

Later!

Thanks a lot Michael. I was hoping you would answer all my questions. I looked at your page and its imformative. Just yesterday I drew a little picture just like that for fun. I'm still having problems because I don't have the questions to even ask because I have no experience. I'll keep looking for more questions.

I would much appreciate your session when its complete. Sometimes charging people for your personal knowledge is just fine. Many people want to learn from others mistakes. But all the problems you have ever experienced have probably lightened your wallet a bit.

I know you said you started out the hard way also with no money. If you could do it again BUT in todays market how would you complete the goal of buying an apartment building.

In my mind I see one option. Buy a positive cash flow property under $50,000 so I only owe $10,000 down or maybe work it out for much less. Then doing that a few times till I have the equity to put a big down payment on an apartment building. Problem is 50k for an income property is low and will be discusting. I'm rambling.. You said somthing about how banks dont need real estate because well they want the moneys more. Is equity considered real estate or more like "I give them 80% of my property value. And when I sell the property I only get 20% or so.

You say SFR ~ single family residence..You mean buying a rental property maybe 30% lower market value? Is that a nice idea for me. Also is buying and "flipping" or remodeling a good idea in this market. Say could I buy and flip and sell a home in San Fransisco without losing my arms and legs waiting for a buyer?

Now If I buy a property and take 80% equity out to buy another piece of property. Then I sell the first..does the next owner just pay the 20% monthly plus the equity I took out if they wanted to own more than 20%? I am getting confused in my sillyness.

My goal is to create income off real estate. And I figure apartments are a nice way to go. I was thinking if I owned a 100 apartment units. At 4 units a building and 3 million a building thats 75million for 100 units. That means I am making payments for 20% of 75million which is 15million. AA how do people do it.. equity? investors? How many years can you stretch the contract for? Does the interest just keep climbing the longer you go? Longer than 20 years? How about 100 years lol ! jk

How do I go about buying cheaper properties?

You don't have to read all that. ((: I should just go to school for RE..but I'm not real good with the shot gun teaching methods. My grandmother has done a lot of real estate and made a fortune. I'll have to speak to her about it but she recently suffered a stroke and has lost a few marbles.

k I'm done for a bit.
~Chris

Originally Posted by AmpChamp

I'm still having problems because I don't have the questions to even ask because I have no experience. I'll keep looking for more questions.

I know what you mean... You don't know what you don't know.

Originally Posted by AmpChamp

I would much appreciate your session when its complete.

I will keep you in mind... I think many people will seek this training, as it will open a lot of eyes.

Originally Posted by AmpChamp

all the problems you have ever experienced have probably lightened your wallet a bit.

QUITE!

Originally Posted by AmpChamp

I know you said you started out the hard way also with no money.

No, I started like most other people, when they think of investing... with hard cold $$... (I had a homestead that was Free 'N Clear, which I pulled a HELOC from, to use as down payments.) Like I said, if I ever pay 20% down again, I will ask someone to shoot me. I can gat houses today for nothing, or maybe a few bucks, like $100.

Originally Posted by AmpChamp

If you could do it again BUT in todays market how would you complete the goal of buying an apartment building.

Partner with someone with apartments. They will show you what to look for and what types of CF it should produce. (Plus they might help fund you?)

Originally Posted by AmpChamp

In my mind I see one option. Buy a positive cash flow property under $50,000 so I only owe $10,000 down or maybe work it out for much less.

As most of the naive do as well. Once you see that houses are there for the taking, you will kick yourself for thinking that way.

Originally Posted by AmpChamp

You said somthing about how banks dont need real estate because well they want the moneys more. Is equity considered real estate...

Banks want $$, REOs don't pay the bills... The Federal Reserve doesn't accept houses as payment on their loans, nor does the depositor want a house, in lieu of their $$. Money is liquid, houses are not. And EQ is a phantom figure... To one appraiser the house is worth $X, to another it's worth $Y. And in a buyer's market it is worth even less. EQ is just the difference between what you owe and what you can get someone to pay for it, and that is all.

Originally Posted by AmpChamp

You say SFR ~ single family residence..You mean buying a rental property maybe 30% lower market value?

Depends, do I need to pay $$? If not, I will pay close to FMV, if the payments are reasonable, if I need to pay with $$, I buy a LOT LOWER than 30% under FMV, more like 50-60% of FMV minus the repairs.

Originally Posted by AmpChamp

buying and "flipping"

Wholesaling is a good strategy, it brings a small amount of $$, but you don't need to have much either.

Originally Posted by AmpChamp

...remodeling a good idea in this market.

Retailing is another technique, but now you have holding costs.

Originally Posted by AmpChamp

Now If I buy a property and take 80% equity out to buy another piece of property. Then I sell the first..does the next owner just pay the 20% monthly plus the equity I took out if they wanted to own more than 20%? I am getting confused in my sillyness.

Head spinning... Umm, what??

Originally Posted by AmpChamp

My goal is to create income off real estate.

That's not a real reason to get into RE, what are you going to do with the $$ is the goal... From there you can match what you want to do with RE to get you there.

Yep.. you have a lot to learn (looking at the rest of what you wrote.)

Originally Posted by REITrainingWhse

No, I started like most other people, when they think of investing... with hard cold $$... (I had a homestead that was Free 'N Clear, which I pulled a HELOC from, to use as down payments.) Like I said, if I ever pay 20% down again, I will ask someone to shoot me. I can gat houses today for nothing, or maybe a few bucks, like $100.

You know I want to know more. You can buy houses for very cheap? Are you talking forclosures or HUD? I would like to know more about these homes. Buying a house and maybe repairing or remodeling is ok with me. I just don't know if It could be sold.

Originally Posted by AmpChamp

You know I want to know more. You can buy houses for very cheap?

It's called MOTIVATED SELLERS... Soo many out there today it is mind-boggling.