First time CRE investor - property management with lender
As first timer buying a multifamily CRE out of state, my question is: are lenders ok with me having no experience in CRE? Having said that, I will either hire a new or retain the current property management company of the property in question.
[{"id": "izfhci4", "text": "It will raise red flags for the exact reason you are asking this question.", "replies": [{"id": "izhzkbv", "text": "I dont like people who deter others from asking opinions here. Not a good approach.", "replies": [{"id": "iziqnfb", "text": "I agree.  Tell me when you see someone doing that.", "replies": [{"id": "izirvm4", "text": "Lol.. you are doing that", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "izh1fvj", "text": "They\u2019ll realistically make you have higher downpayment &amp; make it part of the note that you need to have a PM for x amt of years. Least thats what I saw with 1 client earlier this year. I\u2019m sure there are several ways of addressing this.", "replies": [{"id": "izysf30", "text": "Question \ud83d\ude4b\u200d\u2642\ufe0f for ya. Is there a way to value a building based on CF? For example does CRE building cash flow 180k get a multiple 10 making it worth 1.8M?", "replies": [{"id": "izyy5at", "text": "You could however it will still depend on the leases, a lender isn\u2019t going to include income on a lease that expires in 3 months, right? So if this is a 4 tenant building, you just lost $45,000 in your Cashflow and now $450,000 in \u201cvalue\u201d so I wouldn\u2019t recommend this approach.\n\n(Also is it $180,000 in Cashflow or NOI? This will also largely impact the value.)", "replies": [{"id": "izyycv1", "text": "Cash flow 180k\nHistorical building 3 floors", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "izhbch5", "text": "How many units are we talking about ?", "replies": [{"id": "izhrylr", "text": "6-10 units", "replies": [{"id": "izinrds", "text": "I would imagine, you would be fine with those unit counts.  Just act as if, you got this in the bag and stay on the quieter side.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "izhft4h", "text": "It depends, like others have said there are some lenders that would be ok with a lower LTV as long as they get to vet your property manager.  Others would not touch it. My previous employer would not do loans to inexperienced investors, and the only tiers for LTV would be recourse or non-recourse.", "replies": [], "depth": 1}, {"id": "izk7mxz", "text": "If you are buying 6-10 units, you'll more than likely be getting a local bank loan. Many will allow an inexperienced borrower, especially if you have experienced management. \n\nBut, one of the critical factors is if you are local to the area. You'll probably also need a depository relationship along with a strong balance sheet/credit. \n\nDespite all this, there may be some banks that will pass because of experience.\n\nI'd be looking for an experience partner to team up with. I'd also make sure my first deal was not a heavy value add that might require construction experience on top of operations.", "replies": [{"id": "izkb4pb", "text": "Will Freddie Mac SBL a reasonable approach for my case?", "replies": [{"id": "izkeh14", "text": "You'll need an experience partner along with local professional 3rd management. They will dig into your real estate experience. You may get some concession on experience if you have loads of personal cash and the deal is not a heavy value add.\n\nIf you can find someone to partner with who has a Freddie multifamily loan that would be best. They can lend their resume and net worth/liquidity if needed.\n\nFYI..To clear the SBL $1m minimum, you'll need to buy at about $1.7m at 65% LTV...Thats 10 units at $170k per door, which is pretty steep pricing depending on the market and vintage.\n\nThings to consider:\nNet worth will need to be at least $1.7m\nLiquidity above $170k\nMany agency lenders are now requiring a 10% of equity ($600k) cash contribution from key principals..very roughly $60k in cash as skin in case you were going to raise capital from investors.\n\nLocal banks can be flexible but will give you a financial proctology because of the recourse.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]