Tallahassee Commercial Loans | Florida Hard Money Investor
Buying an apartment building may be difficult for a number of reasons, particularly if you are a single investor. It may be even more difficult to convince a conventional bank that you qualify for such a loan, which is where a hard money loan may be to your advantage. Let’s look at some of the criteria Investors will be looking at which can be barriers to you obtaining the money you need:
Debt Coverage Ratio
This is the ratio of the debt to the income produced from the property. Investors prefer that this ratio be 1.25 or greater, depending on the perceived risk of the investment. If you cannot verify the income, perhaps due to low rental occupancy at the time, this may be more difficult.
Loan to Value
This relationship is pretty much what it says — the ratio of the expected loan to the value of the apartment building. How much loan can you obtain? It depends greatly on where the property is located, the stability of the area, and other factors. The loan to value ratio depends on the bank, but 0.75 to 0.80 is common.
Net Worth
This has to do with you as the borrower, and commercial banks are not going to invest money for a commercial building to someone without a significant net worth. If you don’t have adequate net worth, you have to start looking for business partners to contribute to the project. This is where hard money investors come in handy, because they can be the business partners you can’t find.
Liquidity and Personal Guarantees
Banks want to see liquid assets equal to several months of debt payments. They will want to review your financial statements to see that you have assets that are quickly accessible, in the event your lose some of the recurring income from the investment. Banks may also want personal guarantees, an agreement that links your personal assets to the commercial investment. If the property fails, you could lose everything you own personally. This could also be true for any business partners you have in the transaction, and most partners don’t want to lose any more than the loan principal they invested.
If you see any of the above items as a problem for the apartment building you are considering, this may be the ideal time to look at a hard money loan. Shop Commercial Mortgage has private investors who are willing to participate in an apartment building position. You will pay a higher interest rate than you might with a commercial bank, but that’s a moot point if you wouldn’t be able to secure a commercial loan based on the criteria above. Give Shop Commercial a call at 813-368-9919 and let’s discuss your apartment building investment needs.
