3 Tips to Acquire Apartment Building Financing

Finding apartment building financing can be challenging. With lenders constantly changing their criteria getting the money you need might not be as simple as filling out a loan request. If you are in the market for an apartment building, try these tips to secure a commercial loan. 

1. Apply With Your Business Name

Most of the time it is to your advantage to apply for the loan under your business name. If you do not currently have a business, it is a good idea to get one. Start an LLC or a corporation for your property management business and approach it from that angle.

The lender will look at the credit score of the company itself instead of your individual score. If you are a new business, you can create credit by starting a business account with a local merchant. Make sure that they report to the credit bureaus and then make a few purchases. Pay them off in time and watch your credit rating grow. This demonstrates to the lender that you pay your bills on time and they will be more likely to lend you the money.

In addition, it keeps your personal assets away from the business deal. If you default on the loan, you lose only the apartment building instead of your house. It is best to keep your business separate from your personal endeavors.

2. Seller Financing

When you look at a prospective apartment, inquire whether or not the owner would be open to seller financing. A large percentage of commercial property sales have some sort of owner financing element. Even if it is only short-term, it is better than having to be approved by traditional methods. If you can only get them to agree to a year or two of seller financing, it still gives you time to secure traditional financing with a working business model in place.

You will start getting cash flow immediately and the bank will be more likely to approve your application. Some sellers are willing to carry the financing for an extended period of time. As long as they can get out of the day-to-day operations of the business and get a monthly income out of it, they are satisfied. Do not miss out on a deal like this because you are afraid to ask the owner about seller financing. 

3. Get a Partner

If you are new to investing and lack assets, obtaining a partner can be a valuable way to get your foot in the door. Although the partner relationship might be less than ideal, it is better than not having the apartment complex. The partner may be able to contribute to the down payment and their credit score can help the approval process as well.

Many lenders feel more comfortable if you have an established business person as a partner for the project. You can always do future deals by yourself, but to get started a partner can help get you in the door.