What's the process like for finding a commercial lender?
I'm in the beginning stages of finding an 8-12 unit MF building. The buy side brokers I'm working with suggested finding lenders and seeing what terms they might give me. This is my first property entirely on my own. Some aspects of CRE I have experience with... this is not one of them.

Do I just walk into a Wells Fargo, say I want to borrow 1.5m dollars and then have a conversation? That seems a little hamhanded. But at the same time I haven't identified a property yet so I can't speak to financials. If someone with experience in this could give me a high level overview of how this works I'd be beyond grateful! Probably not give you the soul of my firstborn grateful, but definitely owe you a beer if we ever meet IRL grateful.
[{"id": "erbcnvl", "text": "Ask your broker for a referral or talk to the bank you have an existing relationship with.", "replies": [], "depth": 1}, {"id": "erbdiey", "text": "You will likely have a difficult time finding financing, to be honest. May have to check with several banks. Smaller loan amount, first time investor, etc.\n\nFor multifam, you might be able borrow up to 75% of the appraised value, but maybe less. Your bank will underwrite the property as the primary source of repayment. So whatever the NOI is of the property (generally gross rents less all opex, bad debt, and typically a reserve for capex), that will cover your debt payment at 1.25x coverage or higher. This coverage is called the debt service coverage ratio (dscr). \n\nYour personal ability to service the debt will be less relevant, but the bank will want to see some personal cash reserves to make sure payments could be made if units were theoretically vacant.\n\nThere is of course much more to the process, and financing can take quite some time. You will need to provide the bank all of your personal taxes, personal financial statement, and for the property likely trailing 12 month actual financials for the property, rent roll, and property management contract - assuming you are using a professional property management company. If you are going to try and manage yourself, and you don\u2019t have experience managing housing, that is another hurdle to overcome in bank underwriting.", "replies": [{"id": "erby3yu", "text": "Great information. Thanks for the detail. So it sounds like attempting to have some sort of conversation with lenders up front could be of value.\n\n75% is at the far end of what I was thinking. Since this is my first property I want to make it as meat and potatoes as possible. 75% amortized over 30yr, 5yr balloon seems the most typical for the type of buildings I'm looking at.\n\nRelated to ability to service debt if the units are vacant, I'm planning on keeping about 50k liquid and unleveraged (this will be a cash flow deal, not value add). My idea is that if there's an unforseen complication I want to have a reserve before dipping into other investments. Does that amount/concept sound prudent?", "replies": [{"id": "erc5s8w", "text": "I would encourage you to talk to some lenders and find out their general lending guidelines.\n\nThere are multifam programs through Fannie/Freddie as well. Would be worth seeing if any lenders have those - if you are looking to keep long term. Which it sounds like you are.\n\nYes, 30 year options are available, and typically 5 yr fixed, if going bank financing. Maybe able to get 7 or ten year fixed too though. Just depends on the banks options.\n\nYour reserve amount seems great. Keep in mind the bank may ask for more. But if that is $50k sitting in an account, it may be sufficient.\n\nFwiw, I was in commercial lending for about 5 years with a regional bank. We did not have fha, Fannie, Freddie options for larger multifam.", "replies": [], "depth": 3}, {"id": "ercf09k", "text": "If you\u2019re in Canada DM me", "replies": [], "depth": 3}], "depth": 2}, {"id": "erhikox", "text": "If non recourse you typically do not need to show tax returns - lenders aren\u2019t underwriting your credit, just the property. You\u2019ll only need to show a personal financial statement showing enough net worth for the non recourse carve outs.", "replies": [{"id": "erhr0ga", "text": "This is true. I can\u2019t imagine a bank underwriter accepting a first time purchaser of multifam as a non-recourse loan, but it is possible. Each bank is unique and has their own underwriting standards", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ercxd19", "text": "There are many factors that come into play.  The important thing is the DSCR.  It is one of the tests we use to know which loan program you would qualify for.  PM me if u need help", "replies": [{"id": "ercybpk", "text": "That would be awesome. I'm going to touch base with some lenders next week, I'm sure I'll have a lot of questions after the first conversation. Thanks so much for the help!", "replies": [], "depth": 2}], "depth": 1}, {"id": "erddl3y", "text": "I work for a large Freddie Mac/FNMA lender with a national basis. PM me if you have questions. We offer programs at 1.20x dcr and 80% ltv with fixed loan up to 10 years.  In my opinion agency loans are the way to go because they are non recourse. If something goes wrong they just take the property back and not your other assets. Banks typically do not offer this.", "replies": [{"id": "erhicmm", "text": "Banks have non recourse loans. So do cmbs and Lifecos. It is not unique to agency debt. Agencies are expensive right now because they hit their caps. Spreads have widened considerably so I\u2019d recommend casting a wide net.", "replies": [{"id": "erihjce", "text": "This is true. Not many $1.5MM deals done at life cos or CMBS. A $1.5MM would fit either agencies small loan program. I don\u2019t know how many units it is but likely under 50 and affordable rents which counts as uncapped business.", "replies": [{"id": "erii43d", "text": "Yep you\u2019re right. However, I\u2019ve gotten quotes for small loan balance deals in this range with regional banks and JPM, non recourse, so probably still worth a call.\n\nWhat are your spreads for tier 2, uncapped? Do you do deals in Texas? Mind sending me your contact details? I may be in the market soon for acquisition financing.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "erhi5me", "text": "Commercial lender here. Talk to mortgage brokers. Ask the sales broker for referrals if you don\u2019t know any - they\u2019re typically in the same shop. Google local regional banks, large banks too for that matter, they will typically have a middle market/commercial banking division that handles small loans (&lt;$10M).\n\nYou should be asking for loan sizing parameters (max ltv, min DSCR), origination fees, rate lock procedures (if fixed), rate cap / swap requirements (if floating), prepayment / exit fees, etc. you should also be thinking about if you will be signing recourse or requesting non recourse loans (you\u2019ll need financial strength for both, typically 1x the loan plus 10-20% of the loan amount in liquidity.", "replies": [{"id": "erhoe22", "text": "Great info, thanks so much! The broker I've been working with has referred me to a couple of lenders. I'll keep all of this in mind when reaching out.\n\nOn the financial strength bit, would equity in other CRE investments be included in that calculation? And then you're saying 10-20% on top of the loan amount so it would be min of 1.2x the loan amount? Or 1x the loan with 20% being liquid.", "replies": [{"id": "eri133c", "text": "The latter - 1x loan amount in net worth, of which 10-20% should be liquid. Equity in other investments is fine, but you\u2019ll need to provide an REO schedule with estimated values &amp; associated metrics.\n\nEvery lender is different, but these are good rules of thumb. Once you have a strong relationship, these standards can be relaxed considerably. For example, I often do lower leverage deals with no one on the carveouts at all, so essentially I only have the property.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "esmv8hv", "text": "Commercial lender here. Sounds like you\u2019ve got it covered by now but if you still have questions or need help then Pm me", "replies": [], "depth": 1}]