Ultimate Guide to Getting Qualified for Apartment Loans in California

Ultimate Guide to Getting Qualified for Apartment Loans in California

Buying apartment buildings is more involved than investing in single-family or small multi-unit properties. There are pros and cons to apartment building investments. Thus, investing in apartment buildings require a deeper level of understanding on financial and management aspects of real estate investment.

Steps to Getting Apartment Loans Financing

Analyze the Income of the Property:

You will need to have a current rent roll showing current property income and the past 12 trailing months’ income and expense statement. Subtract total expenses from income to determine the net operating income. Now you will need to know the apartment loan amount. If you have not spoken with a lender or mortgage broker yet estimate 75% of the value. Now take your annual net operating income and divide it by your estimated annual mortgage payments. This will give you a ratio called a debt service coverage ratio.

Analyze Market Rents:

The easiest way to do this is to find three to five apartment buildings in the same sub-market as the subject property. These need to be of similar age and quality as the subject property. You can find the websites for these and see what rents they are getting. Or you can talk to a multifamily property manager, or your commercial realtor. It is helpful to know market rents so you can determine if the rents of the subject are too low and have room for future increases. Also, if the rents of the subject property are the highest in the market this can cause you to get a lower than anticipated appraised value.

Estimate the Appraised Value:

First, determine the capitalization rate of the subject property. To do this take the annual net operating income of the property and divide this by the purchase price or the value that a real estate professions estimates. Find out what cap rates similar properties have sold for in the past year and use this cap rate to estimate the value of your property. Second, ask a real estate professional for help in researching similar properties that have sold within 5 miles of your property. Calculate the price per unit these for these properties and apply it to the number of units of your property. Again, you will need to find similar size and quality properties to yours for this to be accurate.

Apply for the Best Apartment Loan You Qualify For:

You can submit an apartment loan submission package to your top loan programs, or we can do this for you at ALB Commercial Capital. Your objective is to get a letter of interest from the lender that shows the apartment loan terms and pre-qualifies you for the loan amount. Be wary of lenders or brokers that charge upfront or due diligence fees. These programs are likely scams. You shouldn’t have to put money down on an apartment loan until you get a letter of interest, and the funds should go towards the third party reports or legal expenses that the lender actually incurs.

Things You Need to Know before Applying for the Apartment Loans

·         Personal financial statement on all key principals including schedule of real estate owned

·         Current rent roll on the subject property

·         Previous past two full years and past trailing 12 months income and expense statement

·         Copy of your current three credit report. The lender might want to pull your credit but this will likely lower your credit score especially if you are applying to multiple lenders

·         Photos of the interior and exterior of the property

·         A brief apartment loan summery selling the transaction

·         Last two years tax returns and current business financials if you are self employed

A superb lender can help you getting the best rate apartment loans that is rewarding and followed through a streamlined process. An inexperienced lender could cause your apartment loan process to be one that costs you financially, time wise and in number of headaches. Choosing ALB Commercial Capital can free you from many issues exist with an inexperienced lender. Get in touch today with ALB Commercial Capital to obtain flexible terms on best rate apartment loans.  

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