Whether you are a beginning real estate investor or a seasoned real estate investor, this article will give you the tips you need to qualify for an apartment loan. Depending on the size of the apartment building that you are purchasing, qualifying for the appropriate loan is crucial to the success of your investment.

To begin I would like to talk about the types of apartment buildings. An apartment building that is five units or more is considered a commercial building and therefore requires a commercial loan. Four units and below are still considered residential buildings and have different requirements to meet. This article will focus on commercial loans.

Finding the right apartment to invest your hard-earned money into can be a time consuming job, but using experienced professionals can ease the burden significantly. Getting the appropriate apartment loan for your unique situation can be just as perplexing. That is why an experience commercial lender is paramount.

Generally, when buying an apartment building, you are investing a lot of money and in most cases it requires shopping and qualifying for an apartment loan. You want to make sure you are getting a good deal on the financing because that is what could make the deal a success or a failure.

There are a few things you need to be aware of when applying for an apartment loan: the rate, the terms, the loan-to-value (LTV) ratio, and your own objective with the property. Apartment loan rates, just as with any loan rate, fluctuate due to the fact that they are usually tied to indices like the LIBOR and so on. They also fluctuate because of inflation and other economic factors. The key with the interest rate is that it be at a point where your property income can make the mortgage payment, pay all expenses related to the property, and have money left over positive cash flow.

The interest rate depends on the term, the type of loan, and the LTV. The term, on an apartment loan, can vary from five years to 30 years. There are fixed rate loans and variable rate loans and hybrid loans. Fixed rate loans mean that the interest rate is fixed for the life of the loan. Variable rate loans are loans that vary based over the life of the loan. Hybrid loans are usually a fixed rate for a short term and then are adjustable afterwards. Generally speaking, apartment loans require at least 20% down and then the lending institution will finance the 80% portion. If you've got a good history with these types of loans and/or you have a good looking balance sheet, meaning you either have a lot of cash or properties with equity in them, then you can get loans between 90% LTV and 100% LTV, but it is very rare in commercial property.

Once you've found a loan that works for your situation and needs you should lock in a rate if you think rates will be rising. Many apartment loans allow you to lock in the rate for up to 365 days to avoid interest rate risk. Most apartment deals take a few months to close due to the due diligence that needs to be done before making such a big investment.

Knowing your exit strategy, in regards to the apartment building, before you make the purchase is just as crucial as the interest rate. Depending on whether you want to hold on to the property for many years or for just a short time might influence what type of loan you get. Again, an experienced commercial lender can advise you on the best loan for your situation and needs.

Knowing your rate, the terms of the loan, the LTV and your exit strategy are crucial to the apartment loan decision. It's not necessary to know it all before you apply for a loan but now you at least have some basic understanding of what to consider when applying for an apartment loan. Remember to consult with experienced commercial lenders.

Seth is a chief fulfillment manager at ioVentures. For the cheapest rates (usually 1-3% lower than banks) on your apartment loan go to nationalcommercialfunding.com and request a free quote. You'll be surprised! They will consult with you for free on choosing the right apartment loan for your unique situation.