First Time Investor - 6 unit financing?
Came across a great deal 6 units for $350k. How can I finance this commercial rental property? Any tips or tricks? Have about $30k saved. Looking to put 10% down. Seems like the loan size is too small for commercial lending, but buildings with 5+ units are considered commercial. Help please!
[{"id": "fy2x0rd", "text": "Couple of options for you to consider: Bringing in a money partner who brings the money and you do the work or something along those lines. Ask the seller if they would do seller financing so they carry the note.", "replies": [], "depth": 1}, {"id": "fy2xh9c", "text": "I would be surprised if you can find a lender that will give you a commercial mortgage for less than 25 percent down.", "replies": [{"id": "fy32hcm", "text": "\ud835\udc38\ud835\udc60\ud835\udc5d\ud835\udc52\ud835\udc50\ud835\udc56\ud835\udc4e\ud835\udc59\ud835\udc59\ud835\udc66 on a commercial property for only $350k", "replies": [], "depth": 2}, {"id": "fy33rfj", "text": "i've seen local lenders do it!  The kinda guys who won't even make a loan over 1.5 or 2 mil own this space.  Typically comes down to bank relationships too.  \n\nAll that said yes this will be an expensive pain in the ass to finance and is one reason 5-20 unit properties in low value markets are difficult investments.  The fees on everything eat the shit out of your per unit costs.\n\n--I just checked another i remembered being high LTV on a 40 unit, also 5%.  That ones kinda screwy for reasons I can't go into but 25% is absurd for small multi family here.", "replies": [], "depth": 2}, {"id": "fy3fs2x", "text": "I can do 20% down if it cash flows and it\u2019s not office", "replies": [], "depth": 2}], "depth": 1}, {"id": "fy2ybyt", "text": "That loan size is plenty for a commercial real estate loan. But commercial financing is going to require 25% down and not the greatest terms.", "replies": [], "depth": 1}, {"id": "fy2zig9", "text": "Sorry, no way you\u2019re putting 10% down on a six unit. 20% minimum and even that is hard to find. Very likely a lender would require 25% down.", "replies": [{"id": "fy35yuv", "text": "Absolutely. It\u2019s going to be 75% or even 70% LTV plus you need reserves.", "replies": [{"id": "fy3i1zo", "text": "I just did a MF deal where I was quoted 80% LTV and no reserves. Perhaps this is a regional thing?", "replies": [], "depth": 3}, {"id": "fy3ipvj", "text": "I sold a 7 unit last summer and was trying to remember if it was 15 or 10%.  It was 5% :) Just looked at the settlement statement.  \n\nTALK TO SMALL COMMUNITY BANKS PEOPLE.  Though yes, reserves etc were in play as normal (even some escrows for work).  If you are putting 25% down on multifamily in the less than 2 million range you are doing it wrong", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fy30dmi", "text": "If you\u2019re struggling to meet the downpayment, you\u2019re not going to meet the reserve requirement anyways. You should think alternatively, if I can\u2019t afford the down payment, is this really the correct investment for me?", "replies": [{"id": "fy345p5", "text": "from an operations stand point you will not be able to deal with unexpected events too.  Just ignoring that and saying the loan closes fine, what are you going to do when the hot water heater goes out (commercial ones cost a lot more than residential) or a bad bed bug infestation hits where a couple tenants move out and you can't release until you get them all clear?  What about a 20k sewer line issue?\n\nThere are so many ways to wind up screwed without capital on these things.......  The entire time you will also have all your tenants blowing you up and the health department.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fy32ahc", "text": "This is my wheelhouse:  30k ain't' gonna work unless you can get the seller to finance a bit.  PM me your contact info an state.  I can get this done.", "replies": [], "depth": 1}, {"id": "fy36czu", "text": "I will tell you how to do it since everyone is negative on this. Find a hard money loan and use the property as collateral. Terms will be horrible but will allow you to get the property if that is the goal.", "replies": [], "depth": 1}, {"id": "fy39ldn", "text": "No has mentioned owner occupied. You could try that route. Live in a unit", "replies": [{"id": "fy3aqez", "text": "It\u2019s not something that a commercial lender will care about.", "replies": [{"id": "fy3jkmj", "text": "tbh i think that would raise more questions than benefits", "replies": [], "depth": 3}], "depth": 2}, {"id": "fy3c21a", "text": "You can only get owner occupied financing (low down payment) for up to 4 units. 5 and up will only be eligible for a commercial loan, regardless if you live there or not.", "replies": [{"id": "fy3qvoa", "text": "Most commercial lenders want non-owner occupied residential too.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fy3btiy", "text": "20$ down min prefer more.", "replies": [], "depth": 1}, {"id": "fy3fpri", "text": "I don\u2019t know of a single lender that will do less than 20% down on a commercial loan for an investment property", "replies": [], "depth": 1}, {"id": "fy3gk9q", "text": "Get the seller to finance it if you can. Ask them to carry for a few years and then refi them out once you have enough equity or maybe longer term.", "replies": [], "depth": 1}, {"id": "fy3j356", "text": "New borrower with no CRE experience even if the property is Multi-Family will require 25% down to be considered. You might get lenders at 20%, but I would think those are probably going to charge you a bit more on the origination fee and the rate.\n\nYou want to approach a small local community bank for this size loan as this is their bread and butter, but I would try to line up other investors. You can bring them in as limited investors and make some money by being the managing partner.  \n\nYou will be required to guarantee the loan also. And yes there are some that will do non-recourse, but everything has a cost.", "replies": [], "depth": 1}, {"id": "fy3na99", "text": "Lender here, you won\u2019t be able to buy the property at 10% down through traditional financing (probably 30% in todays market unless you go agency financing). Get strategic with the other suggestions here.\n\nYour costs are going to need more equity than what you put down, you should read a couple of books first. \n\nAlso you\u2019ll need", "replies": [], "depth": 1}, {"id": "fy3nwzc", "text": " You're only chance on that 6 unit is by partnering with someone with a strong balance sheet and more down payment.\n\nTry a 4 plex w/ residential, if you can't pull that off then live in 1 of the units.", "replies": [], "depth": 1}, {"id": "fy3pz7e", "text": "Is it 6 units residential? I'm in Ontario, Canada and I managed to find a broker that gave me a residential mortgage (10% down) for the 6 unit building that I own. \n\nIf it's not possible in your area, a money partner would be another option.", "replies": [], "depth": 1}, {"id": "fy3qo58", "text": "Our company services banks around the nation and I primarily focus on originations.\n\nI typically see LTV up to 75% on purchase transactions, and in some rare cases 80%. Given current COVID concerns, I don't see any lender stretching on this.\n\nOthers mentioned post closing liquidity. This is definitely being looked at closely. You may even run into a P&amp;I reserve requirement as part of the loan.\n\nJust my 2 cents.", "replies": [{"id": "fypydsk", "text": "+1. Idk how many guys here have spoken to lenders lately. But you\u2019re looking at a 70-75% LTV.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fy3wdgf", "text": "Apart from down payment you need at least another 50k for the inevitable work required right away or in the first year or so. What happens when the boiler dies or you have knob and tube to replace.", "replies": [], "depth": 1}, {"id": "fy4tzy6", "text": "Have you looked into HUD insured options and any local (city/state) programs for small balance multifamily lending?", "replies": [], "depth": 1}, {"id": "fy5rwfe", "text": "Sounds like you can just flip this deal and make some good money. I am assuming the 6 family is regulated /Rent stabilized?", "replies": [], "depth": 1}, {"id": "fyo6cpf", "text": "Hello, not sure if you're looking to sanity check this, but there is a software that allows you to calculate all of this to see if it's even financeable. You can connect with a lender if it is financeable at the end too. Figured I would mention so you could find out what you qualify for before spending hours on the phone with the bank to initiate the process.", "replies": [], "depth": 1}]