Question About Multifamily Financing for New Investor
I've been in the CRE brokerage business for 6-7 years and know the investment sales and management side well. I am, with a small group, going to be attempting to purchase a number of small apartment buildings (&lt;$1M) over the next few years.

My questions is: how much will lenders look at me as a borrower vs the asset and its performance? We would be looking to finance no more than 65-70% of the purchase.

I have no assets currently under ownership, so no track record, but will have a small group of partners with reasonable incomes.

Thank you all.
[{"id": "hpfmlq5", "text": "The first one is always the hardest (TWSS) but most CRE lenders will underwrite the asset and not you personally. And at 65-70% LTV there shouldn't be a PG required. Also, not having a criminal history will help.", "replies": [], "depth": 1}, {"id": "hpfnew8", "text": "I think 0.65 - 0.70 LTV for a small balance loan sounds fine for you and your experience. As long as the cash-flow for the property has reasonable assumptions, I think lender will be okay with your strategy. Everyone has to start somewhere, depending on your situation with the lender, all they will care about is making sure they are receiving their debt service (unless they are in the business of distressed assets, then they may have interest in the asset itself).", "replies": [{"id": "hq2wh7x", "text": "A more optimistic reply than some of the others, lol. It is much appreciated and hopefully will be our experience.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hpfqa47", "text": "With or without experience, they will look at you. you and your partners will be guaranteeing some of all of the loans. That liability may burn off as the loan ages but you'll still be on the hook if shit truly hits the fan. Income matters to the bank but your individual balance sheets will also come into play. Your partners have decent income, but are they in debt?", "replies": [{"id": "hq2wdxf", "text": "Thank you so much. I doubt any of us is very debt laden, but you bring up a good point, I am not fully aware of their financial situations.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hpfyf4u", "text": "At that size, you'll intially need partners with a track record to draft off of for a piece of the equity. Be sure to structure your partnership so everyone's duties are outlined in an attorney-reviewed partnership agreement or the operating agreement! \n\nAlso if the property can afford professional management, you can use their track record. Be sure to find the best and most experienced in the market for your size. \n\nDealing with local banks and their committees will give you heartache and be prepared for the financial proctology and personal guaranties/recourse from the principals.. as well as a depository relationship with the bank. \n\nIf you are comfortable scaling up, lending gets a little easier in the $3m+ deal size range when non-recourse balance sheet and conduit loans start to be a factor.", "replies": [{"id": "hq2wah1", "text": "Thank you for the thoughts. I figured as much, unless we start small enough to purchase with cash...", "replies": [], "depth": 2}], "depth": 1}, {"id": "hpg9awq", "text": "My thoughts: \n\nWill it be a recourse loan or non-recourse?  Even with non-recourse, they may still look at you and the ownership group because they will likely have bad-boy carveouts that essentially mimic 60-80% of what a recourse loan's PGs would be.  \n\nAnyone with more than 20% ownership (I've had some lenders look at 10% and above) in the property will have to sign paperwork and will be looked at, to some degree. \n\nWhat is your relationship with the lending institution?  It's amazing how much a solid relationship with the individuals who make up the credit committee (or those who go to present to these credit committees on you and your project) will impact your ability to close a loan.  If you know them well (despite not having a track record), this will help a lot.  The better they know you and represent you, the better chance you have. \n\nWho are your partners?  (Rhetorical, you don't need to answer here but think about it).  So long as you have the following covered, I'm sure you'll be fine: \n\n* Someone with a track record &amp; experience of owning\n* Someone with considerable net worth \n* Someone with considerable cash flow\n\nAnd again, these three matter the most for PG'd loans.  If you end up having issues with securing a loan for a property with the current ownership group, make sure to ask the lender and hear what the main barriers are (don't just take an L and move on, learn as much as you can).  If it turns out they need someone with a stronger financial profile with ownership experience, consider finding an investor from  assets nearby.  Which takes me to my final thought...\n\nMany counties have a GIS map system and they show you which companies own which parcels (and their improvement such as apartments).  Find out which LLC or Inc possibly owns some of the apartments that may be similar to what you're trying to buy in the same overall area.  Once you look up the LLC in the Secretary of State registry, you should have registered agent info or manager information (sometimes also called a Governor) and you might be able to send them a letter.  You can reach out and become friends.  Try and learn from them and then, down the road, you may have new friends that may be willing to join you in your efforts to take down an apartment project.  Even if they were to only have 20% of the deal, they might still do it.  This is because \"no one says no to a good deal.\"  If they can do the deal and it's a good deal, people don't say no.  If they say no, either they couldn't do the deal or it wasn't a good deal to begin with.  \n\nOnce you have your first project under your belt, the rest will come more easily and you'll be well on your way to doing more on your own. \n\nGood luck and good hunting!", "replies": [{"id": "hq2w820", "text": "This is a really thorough and helpful response. I will be referencing it as we move forward.", "replies": [], "depth": 2}], "depth": 1}]