How to Get Apartment Financing For Your Investment

Apartment Financing | How to Get Apartment Financing For Your Investment

As the housing market stalls, investors are running towards multi-family properties. It’s becoming increasingly common for families to rent, rather than own their own home, and that means that anyone investing in a rental property is going to find it worth their investment.

But apartment financing isn’t as simple as finding a great property. There is a lot involved, because the economics of apartment complexes can be tricky and lenders want to make sure you are a worthwhile risk.

What’s Involved in Apartment Financing

  • Personal Risk

Unlike some investments, lenders are very unlikely to offer any type of apartment financing unless you’re involved in the process financially. That means a down payment, ideally as much as 20 to 50% of the property’s value. Down payments on rental properties may be more than the down payments on personal homes. If you’re living in the property you may be able to reduce some of the risk, but it is difficult and not usually relevant for commercial property lending. Some lenders may expect 35% of the payment to be paid in cash, often more.

  • Quality Investment Value

It is possible to get a loan for a complex that is struggling. But in general, lenders want to see that the property is being rented. Apartment financing is much easier if many families are living in the apartment right now on lease, in order to show that the complex is succeeding. That’s why it’s also important that you choose rental properties at the right time and research their history thoroughly to showcase the value to

  • Net Operating Income

Lenders also make a point to look at net operating income, which is the value that you’ll receive on the property in rental fees relative to the monthly payments on the loan. Lenders expect a net operating income of at least 1.2 on average, and the more value you can show that you receive, the better your loan offers will be.

  • Research

It’s also important that you understand the market, the lenders, and the way to sell your property as a great investment. Remember, what’s a great investment for you may not be for someone else. Distressed properties with no renters at an excellent cost, for example, are less likely to be financed than an expensive property without vacancies. Banks look at risk differently, so you’ll want to research both commercial lending and the complex history.

Don’t Be Afraid to Get Help

Underwriting for these types of loans can be very difficult, and there is so much involved in apartment financing that you’ll always want to consider partnering with someone that knows how to navigate the market and sell you to lenders.

At CRE Lender, we’ve helped dozens of investors find apartment financing for properties all over the country, with loans ranging from 500k or less to over 5 million, all at the best possible rate. Sign up with CRE Lender today to find out more about our apartment financing options, and get the help you need to finance your next great investment.

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