New Investor - ????'s

[WMN]

I have read through several chat answers that me as a new investor can get a 100% loan with a 680 Fico score, $10,000 in the bank and in business for 3 to 5 years purchasing 20+ units. That's great!

Questions:

I have two other partners. I personally have only one of the above requirements, but my partners have the other two. Is this ok?

How long does it take to get qualified for a new investor loan?

What items are needed from the prospective apartment complex to get pre-qualified? Do I need to be pre-qualified in order to put a contract down on a complex. Is there earnest money that has to be paid with the contract and how much?

What type of cash flow apartment should I be looking at because I do what to get a 20+ unit? Please give a scenerio on this one.

Once I receive this 100% loan and after the monthly mortgage payment for the complex plus expenses are paid, Will there be any profit left for possibly emergencies? Is it better to have the 20% down payment because of this issue?

I want to buy my first unit with enough equity in it to fund my next project units. Any suggestions on this?

I have heard of many investors having apartment complexes all of the country. How is that possible?

What type of interest rate can I expect on a 100% loan compared to a 80/20 loan.

I am sure their are plenty of brilliant minds that can answer the above questions and I thank you a head of time.

WMU

[4EEM]

I think you may have been mislead by the posts.  If you and your partners are in business together and "the business" has good credit and years of experience in real estate investing and property manangement 100% commercial financing "may" be possible, but with only $10,000 in assets the chances are slim to none unless the business partners have a good amount of equity in thier homes are willing to pledge these homes as collateral for the loan.

[MoneyLenderP]

Not True!

Off the bat you cannot get 100% financing on properties 6 plus units.Residential yes you can but not with this scenario.

[WMN]

Thank you! sincerely for your comments.

The brilliant minds I was referring to were Jeff Michaels or Christopher Wallace which are two gurus in the commerical financing field.
Guys are you out there?

WMU ???

[patti porter]

Hi WMU,

I'm not Jeff Michaels or Christopher Wallace but I will give you my 2 cents nonetheless.

Are you buying the apartment personally or as an entity?  If you are buying the property as an entity, then the entity must have the credit score, the cash and experience.

If all paperwork is in order, you can get pre-qualified usually 24 - 48 hrs.  What the lenders require for pre-approval depends on the loan amount and the lender.  Let's assume you are looking for a small loan ($500k - $3 mil).  You can be expected to submit a completed 1003 application, 2 yrs tax returns from all borrowers, schedule of real estate owned, a copy of the sales contract, escrow instructions, current rent roll, photos of the property, 3 yrs of property operating income & expenses.  It is not a requirement to be pre-qualified before you put a contract on a property.  The amount of earnest deposit is not a requirement of the lender but of the seller of the property.  They will tell you how much they want.

Cash flow is difficult to put in one post.  The better question is How Much Cash Flow Do You Want???  Once you know that number, you can run the financial calculations to determine if 100% financing will support that number.  In most cases with 100% financing, the cash flow will be very small or negative.  The variables that you need are loan amount, interest rate and NOI of the property.  Once you have those variables you will be able to determine if you will cash flow.

I doubt you can purchase a building with enough equity to fund another one right off the bat.  But if you do want to do this, you need to buy a undervalued apartment building (whether that is buying it cheap or delayed maintenance) and then when you are ready to buy your next property do a cash out refi.

Investors can have apartment buildings all over the U.S. because they usually have property management companies run them.  The size of the apartment buildings and how many you own will determine if it is cost effective to have a management company.

Your interest rate will be higher on a 100% loan.  With a 100% loan you aren't taking as much risk as the lender(s), so they make you pay for it.

Regards,
Patti Porter

[WMN]

Thank You! Patti

What type of interest rate can I expect on a 100% loan and a loan with 20% down?

Once I do purcahse a property with equity in it, how soon can I pull it out to buy another property?

WMU

[christopher w]

W,

Your rate on the first will remain the same whether you put down 20% or borrow the 20% as a second lien. If you are going full doc on a conventional conforming loan you are looking at 6.75 to 7%, and on a stated anywhere from 7.5 7.875%. Hope this helps. Also, thanks for the kind words in your previous posting. Also, I assume that you are talking about 1-4 Unit complexes, because I don't believe 80/20's are offered on commercial properties.

[patti porter]

Yes you can get 80/20 on commercial properties.  On the 80%, the rates are around 7.5% - 8%.  On the 20%, you are looking at 9% - 18%.

There are programs that have no seasoning requirements for cash out refi's.

Patti Porter

[MoneyLenderP]

Max CLTV on commercial is 90%. Possibly 95%.  The banks want to see 10% of your own funds at least.

[4EEM]

I've seen 100% CLTV commercial on VERY FEW OCCASIONS...and those borrowers had VERY STRONG ASSETS...they by no means needed 100% financing and that's why it was an option for them.
For about 90% of RE investors  100% commercial financing is not an option and it's a bad idea for about 95% of the deals out there.

It is irresponsible for Loan Officers to string investors along with promises of 100% commercial financing.  By law we have no fiduciary obligation to borrowers, but that does not mean we should put them into an investment vehical which has a high probability of sending our clients straight into a brick wall.

I've said it many times on this board and I'll say it again.  If you can't put atleast 10% of your own funds into a commercial deal you have no business in commercial real estate.

Almost every commercial client I've ever worked with wanted 100% financing.  I've had one client which actually recieved the 100% financing...that client could have easily bought the property with cash.

[WMN]

Thank You! Guys.

Can you please explain to me what a full doc and stated conventional conforming loan is?

What is the length of time it takes to get pre-qualified and is pre-qualified the same as pre-approved?

Thanks Again,

WMU

[4EEM]

If you are full doc you provide:
     W2's/Taxes
     Last paystub

If you are stated doc:
     The lender will request a written or verbal verification of employment with no mention of income, you income is stated on the 1003 but not verified.  Stated products range from stated income/verified assets to stated income/stated assets.

Pre-qualification really does not mean anything...any loan officer can pre-qualify someone in less than 5 min.  If you are pre-qualified it means you meet basic program guidelines.  Pre-approval means the lender confirms the pre-qualification and has provided a list of conditions which must be met by the borrower for the lender to honnor thier pre-approval...also known as a conditional approval.  A pre-approval can be provided in as little as a few hours but typically takes 24-48 hours.

[patti porter]

Patrick,

I definitely agree with you.  100% financing is usually not a good option.  But most new investors, want to do these no money down deals...and so they think they need 100% financing.  The only real way to "show" someone that 100% financing is not the way to go, is to look at the numbers.  Usually, when I show them that they will have negative cash flow on 100% financing, they change their minds.

WMN,

Conventional loans are loans that are underwritten to very strict guidelines, set forth by Fannie Mae, Freddie Mac, etc.  They usually offer the lowest rates but of course have stricter guidelines.

Pre-qualified & pre-approved are 2 different items.  On a loan, a lender will pre-qualify you (give you the terms of the loan) but it is all dependent on the due diligence (appraisal, title, etc).  Pre-approved means that you have been approved for a certain dollar value but the approval is contingent on the property meeting the lender's criteria.

Patti  

[WMN]

Patti and Patrick.

Point taken on the 100% financing. We do have more than 10%.

Let's visit rehabing. Looking at the post it, it seems that this would be more advantageous, profit wise, to do.
Could someone tell me the pros and cons.

WMU

[patti porter]

Sorry, my forte is income producing properties.  I don't care for development.

Anyway, your questions is too broad and open-ended.  Keep researching here at the forum and visit a local REIA meeting.  After that if you have a more specific question, come back and post it.

Patti Porter