General Tips Regarding Buying Apartment Buildings

We provide some general advice from a financing perspective, on buying apartment buildings here.  Apartment buildings have been one of the most stable sectors in the commercial real estate business time and again.  Financing today, even in this difficult market is still viable in the multi family arena (unlike most other areas).

Also, the property itself will be heavily scrutinized.  The current and past occupancy levels will be seriously looked at.  For example, if you are considering buying an apartment building with 50% occupancy at a "great price", that you're planning on improving and leasing out, you'll have a difficult time getting that purchase funded.  Or say you have found a property that was just leased up to 90% or so within the last few months, you'll have limited loan options with that one as well, because many lenders will want "seasoned leases".

The loan amount plays a big role in the options you'll have as well.  Apartment loans over $1,000,000  and less than $5,000,000 will have more options, as this is the general sweet spot for most lenders.   

There still is viable financing for stable apartment buildings in good condition and borrowers that are clean.  

Buying Apartment Building
 

• Is the property at around 90% occupied?  If so, for how long? 
• Do you have at least 20% to 25% to put down on the purchases?  
• What's your holding strategy?  Try to match it to the pre payment penalties tied to the loan.  
• Do you have at least 2 years of experience with similar size properties? 
• After you buy the property, and pay all fees, third party reports and the equity injection - will you still have 3 - 4 months worth of reserves left over? 
• Are there any significant deferred maintenance issues with the property you are considering buying?  If so, they will likely impact your deal and you may have to bring more down.    

Buying an apartment building is still doable, but the loan request has to be solid (but not perfect).  Also, due to low interest rates now available and high cap rates within the multifamily sector, many feel this is a once in a lifetime opportunity to purchase some great assets. 

If you have a minimum 20% to put down and your loan request is more than $400,000 we want to talk with you.  Please fill out the loan request form here, so that we can be better prepared to discuss your situation.