Even if you don’t qualify, there are ways to get apartment building financing.

I’m interviewing lenders and brokers to better understand their underwriting requirements as I continue my search for a (larger) apartment complex deal.


This is crucial if I’m going to be able to close the deals I’m working on.


In this article, I’ll go through the most common underwriting requirements and terms you may expect from a commercial lender, as well as how to meet their financing needs even if you don’t meet their qualifications.


Consider the following scenario in which you accomplished everything correctly: You found a nice deal and put it under contract; perhaps you raised some funds from investors; you performed due diligence; and you’re still delighted with the arrangement.


You can now begin the loan application procedure. Your lender asks for your personal financial statement, but then informs you that you lack the necessary net worth and liquidity to obtain financing.


You suddenly realise you’re in serious trouble. While you take pride in the savings account you’ve amassed over the years, you’re well aware that you don’t have the net worth to cover the loan, and you surely don’t have 9 months’ worth of liquidity in reserve.


Wouldn’t it have been more prudent to inquire about your lenders’ lending requirements ahead of time?


Yes, absolutely!


I presented each loan broker/lender numerous scenarios and asked what they are likely to demand to approve the loan and what the terms would be as I sat down with them over the last two weeks. What would the terms of a stabilised asset be like? What if there’s one that isn’t? What does a bridge loan entail?


Of course, the response will vary based on the situation, the amount of the deal, and the lender you speak with. You won’t get any promises, but you will notice trends that you can utilise to put the financing together.

Debt-to-Income Ratio


The debt service payment to net operating income ratio is calculated here. The lender will look for a stable asset with a ratio of at least 1.25. The ratio may be larger for a riskier enterprise. See Debt Service Coverage Ratio (DSC) – What It Is and Why It Matters For You for additional information on debt coverage ratios.


loan-to-value ratio


This is the ratio between the loan balance and the asset’s value. Banks will lend up to 80% of the value of a stabilised asset in a suitable location. In my forecasts, I use 75% and even lower if the property is not stabilised.


Net Worth

Lenders look for a sponsor’s (or sponsors’) net worth to be equal to the loan amount. If you don’t have enough money to meet these requirements, find a partner who is prepared to sign the note with you. Offer that partner more shares in the deal or pay him a fee when the agreement closes.



Lenders prefer to see 6 to 9 months’ worth of debt service payments in liquid assets. They don’t usually demand you to retain this in a separate account; instead, they want to see that level of liquidity on the sponsors’ personal financial statement. If you have a co-signer on the note, the bank will take that person’s liquidity into account as well.








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