How to Finance an Apartment Building

Purchasing an apartment building can potentially help you create a source of long-term passive income, especially if it has several rental units. To buy an apartment building, many investors need to finance part of the purchase. While borrowing the money from a lender is an option, lenders are not willing to finance every borrower. Before you can obtain financing from a lender, you must meet certain requirements, such as having a minimum credit score and a monthly income.

Find a lender that you would like to work with for your financing. Not every lender provides investment property loans, as some of them only focus on residential mortgages. Shop around and find a lender that offers investment property financing for this project.

Complete a loan application with the lender that you want to work with. You will need to provide personal information, such as your name and your Social Security number. If you have a real estate investing business, the lender may want to know more about it. For instance, you may need to provide information about any other investment properties that you own. In some cases, the lender may require you to use these other properties as collateral for the loan you are applying for.

Wait for the underwriting process to be completed by the lender. Once you complete your loan application, the lender will look at your information to make sure that you are eligible for the loan. The loan underwriter will pull a copy of your credit report to make sure that your credit score is satisfactory. You will also need to have a certain amount of assets in reserve to qualify for the loan, in most cases.

Provide enough money for a large down payment. Most lenders will require you to come up with at least 20 percent of the purchase price of the apartment building. If you can come up with even more money than this, it will improve your chances of being approved for the loan. When you make a large down payment on the property, it decreases the risk for the lender.

Ask the seller about any owner financing options. With large apartment complexes, seller financing is often a part of the deal. Even if you get a loan for part of the purchase price, getting some seller financing can help you avoid having to come up with a large down payment for the property. Owner financing is a process by which the owner of the property allows you to make payments for a portion of the purchase instead of paying it all upfront. For example, if the bank will only loan you 80 percent of the purchase price, you could owner finance the other 20 percent. This way, you will not have to come up with any money out of your own pocket.


  • Check your credit before you apply for the loan. If your score is not good, you may want to pay down some debt to increase your score before you apply.