A commercial loan for an apartment building is one of the most accessible loans compared to other investment properties. Commercial lenders generally focus on the property as the primary repayment source, with you, the borrower, being secondary. As apartment buildings have always been a stable asset class, they can get some of the best lending terms. Most real estate investors focus on single-family occupancies instead of apartment complexes since they are easier to manage. However, acquiring financing for single-family homes can be challenging, and getting the business off the ground can take time and effort.
The experienced Real Estate Funding Solutions experts suggest you take the focus off yourself and put it on your property when borrowing from a commercial lender. But before purchasing an apartment building, you must know what qualifies as an apartment under commercial loan guidelines. Any property with one to four family dwellings is not considered for a commercial loan. It includes duplexes and fourplexes. Nevertheless, if the property features five or more units, it will be considered for a commercial loan.
Tips To Help Get a Commercial Loan Approval
Are you planning on purchasing a commercial real estate property as an individual? Or is your business hoping to buy a commercial property? Whatever your case, you must apply for a commercial loan for an apartment building. When applying for a commercial loan, there are numerous things you can do to improve your chances of getting approval. Let’s look at a few things you can do to ensure you get support on your commercial real estate loan.
Arrange Everything You Need
A real estate lender will only spend time on borrowers with the proper paperwork. So, you must ensure that all your paperwork, like tax returns, rental schedules, property outgoings, bank statements, and assessment and liability statements, is ready. Real estate lenders will want all these documents whenever they ask for them and would like to have them in ideal condition. Ensure you prepare everything and submit the documents immediately when they ask you.
Create a Strategy for Your Property
Most reliable lenders like to see a clear picture when offering a commercial loan for an apartment building. They would like to know how you will benefit from the property and how you plan to repay the loan. You must have this strategy clear in your head and present it to your lender. It will help you communicate your ideas with the property and show the lender that you mean business.
Have All Your Finances In Check!
All lenders would like to ensure your finances are sound enough to repay your commercial loan for an apartment building on time, especially if you are a business owner. Lenders usually look at your company’s TDSR (total debt servicing ratio), which is your firm’s annual net operating income divided by the total yearly debt. If your business is in the red or its cash flow is insufficient to make payments, TDSR will also apply to individual directors’ income. The stronger your firm’s financials, the better chance you have of securing a commercial real estate loan.
An apartment building can have fantastic profitability if managed correctly. For instance, if you have an income of $100,000 from rental income on a property and deduct $50,000 for vacancies and operating expenses, you will still get away with a $50,000 profit. Commercial real estate lenders often look at such statistics to determine an apartment complex’s total cash-earning potential. Naturally, it’s not difficult to see why these loans get approved quickly and easily.
Just because it seems easy to get approval for an apartment building, you should still do your research. Contacting a commercial lender with a detailed plan for the building and your personal cash projections will help you make the process much smoother. Proper research will also benefit you. For instance, if you plan on fixing the property, you will significantly increase the overall value of the apartment complex. A property with a high vacancy can also have the most significant potential. However, it will require you to put down more money than you would with a stabilized property. Like with other loans, researching and preparing for an interview with the lender will benefit you and help your business grow more successfully.
Contact Real Estate Funding Solutions To Get Started On Your Loan Process Today!
The team from Real Estate Funding Solutions can help you find ideal loan terms for your next commercial real estate purchase. Our professionals have years of experience assisting people to qualify for commercial loans and can easily guide you through the process. We can also help you collect the necessary documents and ensure you get all the fantastic deals. Call our team at 855-913-8637 if you have any questions about the loan or want to start the process immediately.