New and seasoned real estate investors alike place a high priority on arranging the multifamily financing they need quickly and easily. One way they can expedite the process is by doing their homework and preparing all the necessary documentation in advance.
The following are seven steps you can take to obtain the financing needed to invest in multifamily real estate. This list is not exhaustive, but having these items readily available will help you avoid last-minute delays:
- Be able to establish the property’s total revenue with the following documents:
- Current rent rollA register of rents that includes the names of tenants and amounts due, including any rent in arrear...: Include a register of rents that lists unit floorplan (bed/bath and square footage, if available), tenants, monthly rent due per tenant, and any other lease-related income as proof of the property’s cash flow.
- Trailing 12 month (TTM) statement: Have a detailed report (by month) of the property’s financial performance from its previous 12 months, including all operating income and expenses. This includes any income generated by on-site billboards, cellular antennae, retail space, or other on-site commercial revenue streams.
- Include all other relevant property information, such as use agreements, affordable or age deed restrictions, tenant concentrations (i.e. student, military), and master lease agreements.
- Provide verification of your current total assets, including your net worth and available liquid assets.
- Bring a schedule of real estate owned (SREO) listing the properties currently in your possession, including pertinent information such as:
- Property type
- Location (city/state)
- Number of units
- LenderThe person or party (such as a bank or corporate entity) that loans money on a commercial real estat... name, occupancy percentage, loan maturity dateThe date upon which the principal amount of a loan is due., loan-to-value (LTV), debt service coverage ratio (DSCR)The DSCR is a tool used to underwrite a loan secured by an income producing property. The ratio is c..., recourse/non-recourse
- Total revenue, expenses, and debt for each property
- Ownership structures, include your ownership percentages
- Date(s) of acquisition
- Have necessary, specific documentation to support the type of loan you are seeking:
s: Purchase and sales agreement (PSA) that includes all terms and conditions of the sale. Include scheduled closing date of sale.
s: Information regarding the property’s cost basisThe total cost of a property, minus any depreciation expense deducted for tax purposes. A property..., length of ownership, capital improvements, and prepayment penalties. Include payoff amount and payoff date.
- Have legal representation. It is required by law in a number of states; however, it is always advisable and provides additional protection for both the buyer and seller in the transaction.
- Bring all insurance information, including necessary coverages such as general liability, business income coverage, property insurance, and umbrella liability.