Tips on how to make your lender happy when applying for a multifamily loan.....

There are several key documents that a lender is going to look at to size your loan request.  If the documents are in order up front you will both impress your lender and save time.  Here are tips on two of the documents. 

First, and most obviously,  you need to supply a current rent roll.  Ideally, the rent roll will show the unit number, tenant name, type/size of unit, lease sign date, lease expiration date, the market rent, the actual rent, and the deposit.   For most of us this is a no-brainer however, within the past six months I received a loan request for a 190 unit property with a hand written rent roll that only included the tenant name, the unit number, and the rent.  It did not show the vacant units, street rents, lease starts or expirations, or deposits.  The delay cost the borrower valuable time getting his property refinanced.

The lender will also need to see the previous three years of operating statements along with a current year budget and a year-to-date.  Some lenders require a "trailing twelve" which just means monthly statements for each of the past twelve months.  If you are expensing capital improvements in the maintenance/repair  line please provide a separate list detailing the improvements that were made that year.  This is very important because the lender's underwriter is not going to make adjustments unless they have the back up.  Capital improvements that end up in the annual expense number or the budget directly effect the loan amount because they lower the net operating income that can be used to support the loan.  Yesterday, I ran numbers on a property in Texas and the expense numbers seemed high.  I asked for a detailed list of capital improvements that were in the expense numbers for 2006, 2007, and 2008.  Sure enough, they sent a list detailing $75,000 of capital improvements in their expense numbers that the underwriter could take out.  Each property owner has a different opinion about how to handle capital improvements in the operating statements.  Keep your lender happy by maintaining a detailed list of annual capital improvements that are buried in the operating statements.

Next up?  Insurance Premiums and Payroll.

Holly

202-887-1849