Are you ready to invest in multifamily real estate but feeling frustrated by the complexity of securing financing? Maybe you’ve bought real estate before—maybe even single-family homes—but now that you’re moving into multifamily, you’re hitting a wall with lenders.
You’re trying to get your first deal done, but suddenly, banks are throwing out terms like net worth requirements, liquidity ratios, and debt coverage ratios. You start to wonder: Is this even possible for me?
I’ve been there. When I bought my first 12-unit deal in Washington, D.C., I thought I had everything lined up. I had a bank that seemed excited to fund the deal, and everything was moving along smoothly—until, at the last minute, they pulled out. Suddenly, I was scrambling to find a new lender just days before closing.
That’s why I want to help you avoid these last-minute financing nightmares. In this article, I’m giving you 5 steps to follow so that you can get the best conventional commercial real estate financing, even if you’ve never done a deal before.
The #1 Mistake Investors Make with Financing
One of the biggest mistakes investors make? They wait too long to talk to lenders.
Most people don’t think about financing until they already have a deal under contract. But that’s way too late.
By the time you’re under contract, things are moving too fast. You don’t want to be scrambling to meet lender requirements, negotiating terms, or—worst case—losing your deal because you can’t get financing in place.
So what’s the solution? Start your lender relationships early.
Step 1: Build Relationships with Lenders Before You Need Them
Long before you find a deal, start talking to at least five lenders or brokers.
Brokers are especially valuable because they can shop around for the best loan terms and connect you with different lenders based on your needs.
When you meet with lenders, tell them:
- Who you are and your investing experience
- What kind of deals you’re looking for
- How you plan to underwrite and structure your deals
This helps them get comfortable with you before you bring them a deal, so when the time comes, they’re ready to fund it.
Step 2: Understand Key Lending Terms
If you don’t know how lenders evaluate deals, you’re going to have a hard time getting financing. Here are the three main things banks look at:
Debt Coverage Ratio (DCR)
This is the net operating income (NOI) divided by the debt service (loan payments).
- 1.25 DCR = industry standard minimum (banks love this)
- Above 2.0 = very strong deal (property earns 2x the loan cost)
- Below 1.0 = negative cash flow (banks won’t fund it)
Loan-to-Value (LTV)
Most banks will lend 75–80% of the purchase price. To be safe, I always assume 75% LTV when underwriting deals.
Net Worth & Liquidity Requirements
Lenders want the net worth of the sponsor(s) to equal the loan amount.
That means if you’re getting a $2 million loan, you (or your team) need a $2 million net worth. For liquidity, banks like to see 6–9 months of loan payments in cash or investments.
Step 3: If You Don’t Qualify, Partner with Someone Who Does
You don’t need to meet the net worth and liquidity requirements all on your own. Tons of investors do $1M+ deals without having a $1M net worth. So how are they doing it? They partner.
Find 1–2 investors who have the financial strength to meet these requirements. Ask them to be a co-spondor on your deal. Their networth and liquidity will count towards the loan. This helps you quality for larger deals even if you don’t have a net worth over a million dollars.
Step 4: Avoid Personal Guarantees
If your loan is under $1 million, banks will almost always require a personal guarantee.
This means that if the deal goes south, they can come after your personal assets.
You can avoid this (and protect your assets) by doing bigger deals, which need larger loans, and have better terms.
If your deal is over $1 million, you have a higher change of getting a non-recourse loan. Even if you do have to personally guarantee, you can often negotiate to remove it over time.
Step 5: Prepare a Killer Loan Package
Once you find a deal, you need to impress your lender with a strong loan package.
Your loan package should include:
✔ A professional cover letter introducing you, your team, and your experience
✔ A breakdown of the property, including financials and projections
✔ Details on your net worth and liquidity (or your partners’ if you’re co-sponsoring)
✔ Any supporting documents that show why this is a strong deal
Make sure it looks clean and professional. Even a simple Canva template can make a big difference in how lenders perceive you.
Ready to Make Multifamily Investing Easier?
If you’re serious about getting your first multifamily deal done the right way, let’s talk.
We specialize in helping investors transition from single-family to multifamily—so they can scale faster, close bigger deals, and work toward financial freedom.
Our students typically land their first syndication deal in six months, and the average deal size is $4 million.
Click the link below to book a strategy session. We’ll help you map out a game plan and overcome any financing challenges you’re facing.
To your success,
Michael Blank
