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Bridge Loans for Apartment Property Investors

Investing in apartment properties is as unique as any other type of real estate investment. The first problem that investors come face-to-face with is that getting a traditional loan is much more difficult than you anticipated.

The First Two Hurdles

Generally, apartment properties are in need of repairs and usually those repairs are more extensive than they would be on an office building, for example. When the property is listed for sale, an appraiser sets the value based on location, number of units, crime rate and schools ranking for the building and zoning. As a result, the price does not reflect the cost of renovations that must be made to satisfy conventional loan requirements.

If you should pass the first hurdle with minimal scarring, the second one may trip you up. Before mortgage companies will lend on apartment properties, they must be occupied to a specified percentage; tenants will be screened by the loan department and a majority of the leases must last for more than 11-months after the loan is secured.

Apartments with the Most Potential

Choosing the right location and the right property gives you the greatest advantage with regards to finding funding in Minnesota.

Here are a few tips for the most lucrative apartment properties that have the best chance of approval for a bridge loan.

  • Buildings that have been built in the last five years
  • Apartments that have property parking and are upgraded with cable access
  • Include amenities for families
  • Include washer/dryer units or outlets inside each apartment
  • Include walk-in closets in at least the master bedroom and extra storage space inside the apartment
  • Access to public transportation within a block or two of the complex
  • Near medical facilities and colleges
  • If more than five years old, pass inspections for foundations, grading, EPA and current utility specifications

Of these, the most important is that it should be near a large medical facility and/or a college. The reason is that these locations offer a better opportunity to rent the units in order to meet the standards of a conventional lender.

Since bridge lenders are only for the purpose of getting you from the starting point of a sale to the point where you can obtain a conventional mortgage or resell the property, it is important to put rental capability at the top of the list.

Location, Location

Aside from nearness to colleges, the type of college and the size of the town or city are equally as important.

  • Avoid large cities when it comes to purchasing apartment buildings. The competition is high but the profit margins are low for the ultimate owner, which makes reselling the property more difficult.
  • Find locations at the edge of cities that can be rented at less than the cost of a city apartment. Parents of out-of-town students are more willing to buy a car for their college kid than to pay for a high-priced apartment in a metro area.
  • For apartments near colleges, look for colleges that have a high student population with a low number of dorms or off-campus housing included in tuition fees.
  • Ignore both community colleges and private four-year institutions since they either have local students who can live at home or have endowments from alumni to build enough dorms.
  • Make sure that the location is within 15-minutes of access to businesses where part-time jobs are possible for students.
  • Colleges with medical students increases your long-term rental potential and jobs at cafes, shops and grocery stores hover near medical centers.

Four-year colleges with high graduation rates have a proven track record of keeping students, which translates into long-term rental opportunities for investors and reselling opportunities. Medical facilities hire nurses and doctors who are also known as long-term renters.

If you are planning to purchase an apartment complex in Minnesota and need a bridge loan until you can meet the specifications for traditional funding, give us a call or email us to find out if you can get approval for the loan you need now.

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