Apartment Building Financing

[V2NR 3.0]

My bank is telling me that they will not finance an apartment building valued at 2.8m, fully tenanted with a monthly income of 12k. They are telling me as a first time home owner they will not finance, but would finance if it was a secondary investment. To me, that makes no sense, an apartment building has guaranteed income so why would they refuse to finance ?

Has anyone experienced this before ? Any referrals to other banks ?

[thestroke]

The bank is absolutely correct here. They're not financing you because it's not a good investment. Because: a 30 year mortgage at a fixed 6% for 2.8mil would cost you about 17k per month. The 12k you're averaging would mean an additional personal investment of 5k per month for 30 years (at the end of which all you would have to show for it is a dilapidated apartment building cause we didn't even start talking maintenance yet)

[V2NR 3.0]

Oh no...

[pugboy]

think if you were the bank and you had to seize the property and do something with it
an asset worth 2.8m earning 12k is a 5% return which is not exactly a good investment......

[fouljuice]

an apartment building has guaranteed income

Buh dan if nobody come to rent?

Or if some tenants do dotishness in your place and leave, and the security deposit is not enough to cover the costs to repair?

Or if they let their lil chirren shitt inside the kitchen sink and it eh fully exit the waste pipeline and the smell vampsing back into the rooms?

I serious.

[whyteliver]

mortgaging an apartment building means your kids will enjoy that....

[LalChun]

12k a month is worth that headache? Serious question

[kjaglal76v2]

buy it cash OP

[V2NR 3.0]

buy it cash OP

This may need to happen.

Just being the devils advocate here, all of the scenarios given above can happen with a private house as well.

[pioneer]

an apartment building has guaranteed income

Buh dan if nobody come to rent?

Or if some tenants do dotishness in your place and leave, and the security deposit is not enough to cover the costs to repair?

Or if they let their lil chirren shitt inside the kitchen sink and it eh fully exit the waste pipeline and the smell vampsing back into the rooms?

I serious.

Heard of that happening...sufferer/gutter mentality tenants allowing their chiren to use the kitchen sink as a toilet

And flush pampers down the toilet

Thaz cuz they grow up usin latrine

[Dizzy28]

How much financing you were looking for? I can't see a bank turning you down if you have 30% or more downpayment. And well rentals carry a higher interest than residential mortgage because it is classed as commercial. OP are you telling us the whole story?

[1UZFE]

12k for 2.8mil = piss poor investment.
Bank would not lend for that.
Bank loaned 1.1 mil for 10k per mth for a building, that was bringing in 28k per mth.

[10-01]

for every Million its $10 000.00 per month for 25 years that's at a 6% interest rate , my banker tells me to use this to gauge what im buying thats from scotiabank

Try a Credit Union they are more flexible when it comes to lending

also your fixed monthly income has to be able to pay the loan , 60% of that income is used for daily needs , food , car , bills , other payments
and the other 40 % is allowed to pay the bank , they use this for reasons that if your monthly expenses cannot stay within the 60 % u will not qualify for the loan , and dont lie because they have your bank records and they will go back as far as 3-4 years to ensure you can pay the loan

been ther with banks many times ............

[rspann]

That income for a $2.8 m building seems very low , how many apartments does it have? The problem could be that there are people who are building buildings to resell at a profit so if you buy that ,you are actually paying more than you should.
If you buy a piece of land for $600 and spend $1.5 m on a building you can end up with eight to ten apartments at an average rental of $3000 to $3500 monthly. That is better investment but the only problem as you stated is getting the finance.
Tenants are not generally a problem unless you are not careful with your screening, and if you know the laws concerning tenants and landlords , and the bailiff act, you will have a good understanding of how to deal with problems.

I have been in that business for close to twenty years and have not had any major problems. If a building is properly built, there are no worries( sometimes a tap or an electrical fitting) once in a while you may get an errant tenant who feels that they have more rights than the owner , but there are legal ways to deal with that.

In my experience, people pay their rent because they don't want to end up on on the streets. When they have a problem and are unable to pay ,you can easily figure out ,based on your knowledge of the particular person , what to do. You can give them a grace period or you can turn the situation over to a bailiff ,who will levy for your arrears of rent.

In general it is a very good business , but the best way is to put up your own building, because you don't know how an existing building was constructed, and if there are underlying defects in it. Dealing with the tenants and maintenance is fairly straightforward and it is wise to know a good bailiff for when that time arises( Omar with the Evo is an excellent bailiff and gets the job done effectively).

[mitsutt]

OP 12k return on 2.8M is not a good investment.

[crazychinee]

Ignoring all the real estate experts here..

1)How much land is it OP and where is it located?
2) Did you have a valuation done?
3) How many apartments, (2 bdroom , 1 bedroom?), and is there room for expansion?

[The_Honourable]

General question, since 2.8mil to 12K ratio is a bad investment, what is a good "property investment to rent" ratio to work with putting location and other factors aside? i.e for every million invested, what is the minimum amount of rent that can be collected? Example, like Residential:

$1,000,000 property - $7,000 rent minimum

$2,000,000 property - $14,000 rent minimum.

etc?

[brams112]

My bank is telling me that they will not finance an apartment building valued at 2.8m, fully tenanted with a monthly income of 12k. They are telling me as a first time home owner they will not finance, but would finance if it was a secondary investment. To me, that makes no sense, an apartment building has guaranteed income so why would they refuse to finance ?

Has anyone experienced this before ? Any referrals to other banks ?

For that amount,the return suppose to be close to 30k's,if not you are wasting your time,not all apartment buildings are guaranteed income unless you know about your tenants,opie.Right now there are a few buildings in the classifieds for the amount you want to invest,look into it,you need to get down to the maths of the investment,which is simple,how long after you have finished paying for the building,will you turn a profit on your investment.Will the property be worth the risk,what about the location?

[crazybalhead]

Interesting ched.

[mitsutt]

Firstly this has nothing to do with being a 'real estate expert' and secondly brams112 is quite correct. For 2.8M to generate 12k is wasting ur time.
Here's a gauge The_Honourable ,
excluding the cost of land , 1M will get you 4 spacious 8-900sqft 2 bedroom apartments which in most areas will rent for 3000x4= 12000.In some areas it will rent for 3500 but lets use the lower. Add another 1M, thats 8 units=24000, throw in the 800k for the land and you have 2.8M generating a minimum of 24000.
If properly invested 2.8M should pay the mortgage itself and give you extra income every month.

But I kinda chupid

[pugboy]

800k for land to fit 4 apts inclusive of car parking(t&c 6 spots) is a bit of a stretch depending on location and type of neighbourhood.

there are certainly many persons who have been fortunate to be owners of land formerly agricultural etc
ie large lots who have capitalized on this type of opportunity and built and sold such buildings.
the OP just needs to calculate his own risks and what he is willing to tie up his money for.

one other consideration is a person should at least hope to buy in an area where the property value will increase over time, some use a rule of thumb as to hope the value doubles in 10yrs or so.

[kjaglal76v2]

OP buy land up UWI side cash,mortgage land & build secure apts, make a mint & live comfy for the rest of your life

[nervewrecker]

Average country side apartment rent is $1500.00 a month and they ain't big. You could easily fit 10 of those on a lot of land and collect $15000.00 a month. $12k is ummm....something not right there at all.

Just for shiz and giggles, who is Omar with the evo? Anyone care to inbox me that info

[kjaglal76v2]

the fastest evo

[2 d Max Auto]

Good Thread OP.

Good info all round Tuners...........

I've been exploring the financing options with my bankers as well, for commercial loans of course.

Sadly like everything else great ideas alone don't cut it.............you must have money to make money ............

[RASC]

Good Thread OP.

Good info all round Tuners...........

I've been exploring the financing options with my bankers as well, for commercial loans of course.

Sadly like everything else great ideas alone don't cut it.............you must have money to make money ............

Not technically so...but its all relative honestly.

[The_Honourable]

Firstly this has nothing to do with being a 'real estate expert' and secondly brams112 is quite correct. For 2.8M to generate 12k is wasting ur time.
Here's a gauge The_Honourable ,
excluding the cost of land , 1M will get you 4 spacious 8-900sqft 2 bedroom apartments which in most areas will rent for 3000x4= 12000.In some areas it will rent for 3500 but lets use the lower. Add another 1M, thats 8 units=24000, throw in the 800k for the land and you have 2.8M generating a minimum of 24000.
If properly invested 2.8M should pay the mortgage itself and give you extra income every month.

But I kinda chupid

I like that gauge. Know it is subject to change over time but just have to pay attention to the market. Thanks for the info!

800k for land to fit 4 apts inclusive of car parking(t&c 6 spots) is a bit of a stretch depending on location and type of neighbourhood.

there are certainly many persons who have been fortunate to be owners of land formerly agricultural etc
ie large lots who have capitalized on this type of opportunity and built and sold such buildings.
the OP just needs to calculate his own risks and what he is willing to tie up his money for.

one other consideration is a person should at least hope to buy in an area where the property value will increase over time, some use a rule of thumb as to hope the value doubles in 10yrs or so.

I hear you, the last part is more promising. Buy up some land, and hope that the property and area value goes up over time. If so, you pull off mitsutt idea.

[nismodriver]

You can find something around East or Central even (high renting areas) for 1.4-1.6M and gain between 9K to 12K a month in rent. Also you can check Sagicor, with them downpayment required is less (sometimes even 10%) and interest rates are good , being commercial property, compared to the banks. If your interested in a contact at Sagicor, PM me, that's if you found something else or you getting this building at 50% off....