As the third quarter of 2013 came to a close, vacancy rates in apartment buildings had declined and demand for rental housing remained steady. Given the strength of the market’s recovery, commercial brokers are likely to come across clients looking for small commercial mortgages for apartment properties. However, before you begin submitting loan scenarios for borrowers seeking apartment financing, there are some things you and your borrower need to square away.
- Can you discuss your borrower’s credit report? Your borrower’s credit is going to be a key factor for any small commercial lender when it comes to making a financing decision. Both you and your borrower should be able to talk about the report with your lender and explain any past credit issues.
- How familiar are you with your borrower’s property? Make sure you know how big the apartment building is, how many tenants it’s able to house, what its occupancy and vacancy rates are and any other relevant information. Providing your small commercial lender with photos of the property is also helpful.
- What is your borrower going to do with the money? Small commercial mortgage lenders are always interested in what a borrower plans to do with a mortgage once he or she has the money. Make sure that you and your borrower can discuss the use of proceeds in detail with your lender; this will make it easier for your borrower to obtain the mortgage.
- Can your borrower make the monthly payments? It’s very important to small commercial mortgage lenders that the rental income from an apartment building can support the loan payment. You’ll want to provide the lender with any relevant financial data about your borrower’s business, such as a 1003 or personal financial statement, a rent roll and an income and expense report, so that your lender can determine your borrower’s capacity to pay.
If you know the answers to the questions above, you’re ready to submit an apartment loan scenario to a small commercial mortgage lender. As a broker, it’s important for you to be able to discuss these topics with the lender and your borrower, since it’s your job to facilitate the relationship between the two parties throughout the process. The more you know about your borrower’s credit, property, plans and ability to pay, the easier it will be to help your borrower attain the small commercial mortgage that he or she needs.