Secure an Apartment Building Loan

 5 Steps to Securing Apartment Building Financing

 1. Start Saving for Your Down Payment

Unless you have a group of private investors who will handle your down payment, the first essential step you need to take toward securing apartment building financing is to start saving. The more you’re able to set aside before you apply for a loan, the more you stand a chance of receiving.

Obviously, there may be other unique factors at play, too. If you already own properties that have built equity or are even paid off, that will go a long way toward helping you secure a favorable loan.

Nonetheless, if you’re committed to adding the benefits of an apartment building to your portfolio, then start saving right away.

2. Start Looking at Available Apartment Buildings

Fortunately, while you’re saving funds, you can start looking for actual apartment buildings, as well.

Once again, what your search entails will depend on your unique preferences. Most novices begin with a simple five-unit building, but you may decide to go for something slightly bigger.

Whatever the case, your budget needs to be the main guiding factor here.

To help keep costs down, you could consider apartment buildings that need renovations. You still want to keep your budget in mind when considering improvements, but an apartment building in need of a little TLC may reflect a motivated seller who’s ready to give you a good price.

3. Contact a Broker - We Finance Apartment Buildings

Unless you think you have enough time to find the ideal apartment building on your own, it might be worth bringing in an expert who does this kind of work for a living. Working with an apartment-building broker can help speed up the process considerably and may even help save you money on the purchase price.

Just be sure you don’t hire anyone until you know exactly how much you can realistically afford. Depending on where you’re looking to buy an apartment building, your broker may be able to offer you all kinds of tempting options that would simply stretch your budget much too far.

Let your broker know exactly what you’re looking for in a building, including not just price but also several options for locations and number of tenants.

4. Find an Asset-Based Lender - DSCR Loans with No W2

Whether you were able to find the building on your own or you leverage the professional abilities of a broker, once you know the apartment complex you want to buy, get in touch with an asset-based lender.

These are nonbank lenders who will decide your eligibility for apartment building financing based primarily on the building itself.

For example, here at Rental Home Financing, we won’t request your W2s, income statements, bank records, or any other documents that don’t directly relate to the apartment complex you’re interested in purchasing. If we determine that the building in question will give you the necessary income to pay us back, we’ll most likely underwrite the loan you require.

There are only two other alternatives. The first is using a government loan. Fannie Mae, Freddie Mac, and the FHA all offer various types of loans that can be used to purchase apartments. However, each of them entails a good deal of red tape

Your only other option is to enlist the help of private investors. Although this may be an option for some people, raising capital from multiple parties can also be a time-consuming, frustrating, and, ultimately, ill-fated plan. The practice is going to cut down on your investment’s ROI, too.

On the other hand, an asset-based lender is straightforward. As long as you have their required down payment based on the loan-to-value they demand, you’ll be able to move forward with your purchase almost immediately.

5. Form a Limited Liability Company

That said, before you receive your actual apartment building financing and finish the process, don’t forget to form a limited liability company (LLC).

There are a number of reasons for doing so, but the most important has to do with the protection this legal entity will provide.

As the name suggests, a limited liability company helps to mitigate how much potential damage you’re vulnerable to in the event of a lawsuit.

This is vital when you own an apartment building because the more tenants you have, the more exposed you are to legal proceedings. For example, say one of your tenants claims that they slipped while walking into the building because the stairs were covered in ice. While they could sue you for negligence, even a successful suit wouldn’t reach your personal assets if you had an LLC separating the two.

We Have the Apartment Building Financing You Need

If you have only just decided to add an apartment to your portfolio, then it might be some time before you actually need help paying for it.

Still, when you do need apartment building financing, our team of experts is here to help. For more than 20 years, we’ve been helping experienced investors like you secure the financing they need to grow their portfolios of properties.

No matter where you are on your way to purchasing an apartment, please feel free to contact us with any questions you may have about how we can help.

And if you are ready for your loan, apply online, and you’ll hear back from us ASAP.