Christian OsgoodCEO, Multifamily Strategy · CEO at Multifamily Strategy

What The Banks Want To See…

16 Aug 2024 · 1 min

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In this monologue, Christian Osgood explains the key criteria banks use when evaluating real‑estate loan applications. He emphasizes that banks look for partners with strong credit scores and a combined net worth that is at least half of the requested loan amount (e.g., a $2 million loan requires a $1 million cumulative net worth). Osgood notes that meeting these thresholds enables investors to scale into larger deals. When a sponsor’s net worth is insufficient, he advises bringing in an equity partner who can provide the necessary capital, and then structuring the operating agreement to define how cash will be returned and how the equity partner will earn a return on their investment.

Chapters

What else does the bank want to see? They want to see that the partners all have good credit scores and your group, so all of the investors in your deal, have a combined net worth of at least the loan amount. If they're going to lend you $2 million as a party, you all better be worth cumulatively $1 million. Now, this has allowed me to scale into larger and larger deals. When you're starting, you may not qualify for the bank debt because you are starting at a lower net worth than the deal that you found. Bring in the equity partner, they can bring in all of the money, and you will structure a deal in the operating agreement of how cash is going to be returned to them and they're going to get their return on their money.