Commercial Apartment Building Mortgage Loans

For those who are seeking apartment building mortgage loans, there is a two tier approval process.  First, the apartment building needs to be underwritten.   Apartment building mortgage loans are commercial loans and are normally 3 year, 5 year, or 7 year loan programs which are normally amortized over 20 years, 25 years, or 30 years.  There are Fannie Mae apartment building mortgage loans available that are 10 year loan programs amortized over 30 years, however, minimum loan sizes are normally over $1 million and there are huge prepayment penalties.  Fortunately, these Fannie Mae loan programs have assumable mortgage clauses in them so if you need to sell the apartment building or apartment complex, the new buyer can assume the existing apartment building mortgage loans.

Property Location And Condition Are Important In Apartment Building Mortgage Loans

Terms and mortgage rates of apartment building mortgage loans are based on property location and the condition of the apartment building and apartment building or complex location.  If the apartment building is in an excellent area and the condition is above average, it is considered Tier I.  If the apartment building is in fair condition and is in a descent area, it is considered Tier II.  If the apartment building is in a rougher side of town and the condition is habitable but in need of modernization, then the the property is considered Tier III.  You will get the best mortgage rates and best mortgage terms with Tier I apartment buildings and up to 80% Loan to Value mortgage loan.  Lower Tiered apartment buildings will probably require a 60%, 65%, 70%, or 75% Loan to Value and higher mortgage rates.  The apartment building needs to cash flow and have a good occupancy rate.  The building needs to be able to pay for itself and be profitable and the eviction rate needs to be at a minimum.

Apartment Building Mortgage Loan Borrower Requirements

The apartment building mortgage loan lender will also require the owner of the apartment building or complex to be the guarantor of the loan and will require that the guarantor have experience in running an apartment building or apartment complex.  Smaller apartment buildings such as a six unit apartment building will require minimal experience from the guarantor and/or owner, however, larger apartment buildings such as 50 plus unit apartment buildings, a guarantor and/or apartment building owner should have several years of experience in running an apartment building and be familiar with the laws of evicting non payers and tenant rights.  The borrower should have descent credit scores and assets and solid cash flow whether is via his apartment buildings or other investment interests.

Letter Of Interest

Below are the the basic initial items needed by an apartment mortgage lender in order for them to issue a Letter of Interest:

  1. Current rent roll of the apartment building or apartment complex.
  2. Operating statements from the past three years and three years business tax returns and three years personal tax returns.  Schedule E can be provided initially.
  3. Pictures of the property that includes interior, exterior, and surrounding areas.
  4. Personal Financial Statement (net worth, liquidity, income) of borrower/guarantor.
  5. Purchase contract (if a purchase).
  6. Resume of the owner/operator/guarantor.
The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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