Get Your Multifamily Commercial Loan - By: Louis Jeffries

A Multifamily Commercial Mortgage.

A Multifamily property eligible for commercial financing is defined as a structure having at least 5 or more units with the residences for permanent habitation. The major factor in determining if you can qualify for a multifamily commercial mortgage is the property itself. These are a few key characteristics and considerations on a multifamily commercial property to make the property eligible to be financed:

The Property Condition.

1. Signed leases with terms of 1 year or greater.
2. What are the number of bedrooms and bathrooms.
3. What is the history of the vacancy rates.
4. Do the units have separate utilities to bill the tenants directly.
5. Is your commercial multifamily property professionally managed.
6. Is there deferred maintenance or functional obsolescence of the property.
7. Does the facility have a pool, clubhouse or tennis court and other amenities.
8. Is the facility conveniently located to employment, education, shopping or attractions.

Not only are these characteristics important in determining if the property qualifies for financing, these are major factors in determining the value of the property.

The Property and Income.

In addition to the condition of the property the income as compared to the expenses of the property is key to determining both the value of the property and how much mortgage the property can qualify for. The greater the income in relation to expenses the easier it is to qualify for a commercial mortgage. The best rates are usually offered by the most conservative lenders. The most conservative lenders require 1.5 times the income to the expenses to qualify for financing. If property is in good condition and it has a little less income there is still financing available down to as low as 1.1 times the expenses.

The Management Company.

The experience of the property manager is also a consideration to financing. If you have purchased a commercial property or are considering doing so and you are not experienced owning or managing the multifamily properties it is essential to hire professional property management. The larger properties having a property management company is not even a second thought. For smaller units you may think they are an unnecessary expense, but professional property managers help you chances to qualify for financing if you do not have the experience.

The Owner.

Often times for larger units the financing is based solely on the property. But for smaller multi family projects the lenders require a personal guarantee and the review, income, credit and assets just like a residential investment property. Additionally, the typical down payment is 20% to 30% for these projects and the lender whats you to have reserves for repairs, vacancies and other contingencies.

The Loan.

Multifamily commercial loans are generally structure with terms written with 5, 7, 10, 15, 20, 25, and 30 years terms with or without balloon payments. For this type of commercial loan expect to provide full documentation including:

1. Last 3 years property operating statement
2. Year to date property operating statement
3. Property rent roll
4. Last 3 years federal tax returns of borrower 5. Personal financial statement(s)
6. Digital photos of the subject property

There are multifamily commercial mortgage products that can help people with significantly impaired credit, these have higher commercial loan rates. For borrowers with great credit and assets that deserve the best rates, funding is also available .

About the Author

Louis Jeffries has been a Mortgage Banker for over 20 years. Vickie Rolland as the contributing author is a Commercial Mortgage Specialist for All Dominion Mortgage. Contact Louis louisj@alldominionmortgage.com Contact Vickie vickie@alldominionmortgage.com Visit The Blogs Commercial Mortgage Hard Money

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