Basic Requirements Of Apartment Financing Winston Rowe & Associates

March 29, 2012 - PRLog -- Basic Requirements Of Apartment Financing Winston Rowe & Associates

Winston Rowe & Associates a no upfront fee commercial real estate finance firm has prepared the article to provide a better understanding of the requirements of apartment building financing.

If you’re interested in learning more about financing apartment building for purchase, acquisition, or refinance. You can contact Winston Rowe & Associates at 248-246-2243 or visit them on line at http://www.winstonrowe.com

Overview:

Commercial real estate investors contact Winston Rowe & Associates, wanting to know in-advance if their deal can qualify for private money or institutionally funded (bank) apartment building loan. Unlike residential lenders, commercial mortgage lenders do not issue "pre-approvals"; they simply can't tell if a deal will get done until all of the material facts have been verified (pre-due diligence).

Loan-to-Value (LTV):

LTV has been dramatically reduced during this "credit squeeze".  In the past apartment buildings with LTV ratios above 80% were strong transaction. However standards have tightened. In today's credit environment, investors should not expect to see any loan offers above 75% and many are coming in significantly lower. 70% is a normal LTV ratio on new purchases with some lenders willing to go to 75% on refinance loans. Seller carried 2nd mortgages are discouraged and often disallowed altogether. Borrowers and sponsors without large cash investments in a deal will be turned away.

Debt Service Coverage Ratio (DSCR):

Banks, insurance companies and Wall Street brokers simply will not write loans against underperforming or vacant buildings anymore. Only stabilized assets need apply for institutional funding now-a-days. A building must be able to demonstrate a history of profitability and low vacancy. To be approved for a bank loan for the purchase or refinance an apartment building, the building must have a net-operating-income (NOI) equal to 125% of the proposed mortgage payment (a DSCR of 1.25). Deals that do not meet this requirement will have to wait until the credit markets improve or seek private funding.

Credit::

Borrowers or sponsors with weak credit scores are being summarily rejected by banks. To qualify for a low interest loan with good terms, from an institutional lender, all the principle borrowers need to have a tri-merged credit score of 680 or better.

Experience::

Banks are not willing to take a chance on first-time apartment investors. All borrowers are now required to demonstrate real experience in rental housing and a track record of success. Borrowers are asked to provide a detailed resume of past businesses owned that will be verified through their articles of incorporation and financial reports.

Net-Worth & Liquidity::

Many banks have instituted a policy of requiring that their borrowers have a net-worth at least equal to the balance of the loan they are seeking. In-other-words, if you want to borrow $1MM from the bank to buy an apartment complex, you need a net-worth of at least $1MM. Further, they will want to see that you have some money in the bank above and beyond the funds you're using for a down-payment. Often they will require borrowers to have a savings account balance equal to 12 monthly mortgage payments. Borrowers will be asked to provide a detailed personal financial statement that will need to be verified.

Quality Property in Good Location::

To secure financing from a traditional lender the building must be in a city or town that is not particularly depressed economically.

Winston Rowe & Associates has an excellent knowledge based investor resource for apartment building valuation and market analysis located at:

http://www.winstonrowe.com/Free_Real_Estate_Resources.html

Winston Rowe & Associates has a core focus on building long-term relationships, delivering exceptional and individualized customer service, and positioning loan products that best achieve their client’s goals. Their preemptive problem-solving approach is perfect for clients with credit and time sensitive issues.

Winston Rowe & Associates
31408 Harper Ave
Suite 147
Saint Clair Shores MI 48082
248-246-2243

Winston Rowe & Associates has no upfront free commercial loans in the following states.

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,  Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee,   Texas, Utah, Vermont, Virginia,   Washington, Washington DC, West Virginia, Wisconsin, Wyoming

# # #

Winston Rowe & Associates is a nation wide commercial real estate consulting firm that does not charge upfront fees for commercial loans.