Advice on gameplan for high unit building acquisition

[Ilya P.]

Yes. I'm looking to either transform single family with high Sq footage to 3-4 units. Then add adu

or buy a 2-4 unit that has value acomparable that has value add potential.

Ultimately I need 5 units to have experience with lenders.

Then refi and pull cash out.

I need like 600k as a down-payment. I figure I'll get mayhe 250k from the refi based on 5plex noi and comparables.

I'd like to take a loan for the other 350k for example to meet the 10% down payment on a low income building hud loan.

Is there an easier way to get into A higher unit commercial building?

[Dustin Tucker]

Hello Ilya,

Where are you looking at purchasing your 1st property.

When converting a property from a single family to a multi family, you will need to check on the zoning requirements, depending on your location, not every location has zoning.

As far as lending goes, it is far easier to finance a single family up to a quadplex, than financing 5 plus units, the DSCR Market for 5+ units is extremely low right now, and there are few if any lenders in that space.

For financing 1-4 units, there are Millions of dollars chasing those loans, so you can easily obtain long term financing, at rates between 5-7%.

Please reach out if you have a property identified, and I can help you with financing options.

[Ilya P.]

Thank you. Is there another way? Other then seller finance.

[Ryan Cheek]

Quote from @Dustin Tucker:

Hello Ilya,

Where are you looking at purchasing your 1st property.

When converting a property from a single family to a multi family, you will need to check on the zoning requirements, depending on your location, not every location has zoning.

As far as lending goes, it is far easier to finance a single family up to a quadplex, than financing 5 plus units, the DSCR Market for 5+ units is extremely low right now, and there are few if any lenders in that space.

For financing 1-4 units, there are Millions of dollars chasing those loans, so you can easily obtain long term financing, at rates between 5-7%.

Please reach out if you have a property identified, and I can help you with financing options.

Hey there!

It sounds like you’re on a great track with your strategy to scale up and maximize the value of your properties. Transforming SFHs into multi-units and targeting 2-4 units for value-add potential is a smart way to build your portfolio, especially if your goal is to qualify for larger loans down the line.

If you're aiming to hit the 5-unit mark and unlock better financing options, here's something to consider:

1. Leveraging BRRRR Strategy: You're already thinking about the refi route, which is key. If you can build equity and pull out cash through a BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy, that could get you the funds you need for that larger down payment on a multi-family or HUD loan. Just make sure to keep an eye on those rehab costs to ensure you're leaving enough margin for your cash-out.
2. Alternative Financing: Getting into a larger commercial property can be tricky, but sometimes partnering with investors or syndicating deals can help ease the capital burden. If you find a deal with solid cash flow, partnering up might give you more flexibility while still allowing you to control and operate the property.
3. Out-of-State Opportunities: If the local market makes it tough to find larger value-add properties, you could consider diversifying into other markets with lower barriers to entry. For example, in Indianapolis, there are new construction duplexes priced at around $400-450k with strong rental returns. This could allow you to get into a higher cash-flowing property without needing that massive down payment you're talking about for a HUD loan.

If you’re open to discussing this further, feel free to connect—I work in the Indianapolis area, and we specialize in helping investors find value-add opportunities in growing markets. It might be worth chatting to see if it aligns with your goals.

Best of luck in your journey! Let me know if you want to brainstorm ideas.

Cheers,
Ryan Cheek

[Ryan Cheek]

Quote from @Ilya P.:

Yes. I'm looking to either transform single family with high Sq footage to 3-4 units. Then add adu

or buy a 2-4 unit that has value acomparable that has value add potential.

Ultimately I need 5 units to have experience with lenders.

Then refi and pull cash out.

I need like 600k as a down-payment. I figure I'll get mayhe 250k from the refi based on 5plex noi and comparables.

I'd like to take a loan for the other 350k for example to meet the 10% down payment on a low income building hud loan.

Is there an easier way to get into A higher unit commercial building?

Hey there!

It sounds like you’re on a great track with your strategy to scale up and maximize the value of your properties. Transforming SFHs into multi-units and targeting 2-4 units for value-add potential is a smart way to build your portfolio, especially if your goal is to qualify for larger loans down the line.

If you're aiming to hit the 5-unit mark and unlock better financing options, here's something to consider:

1. Leveraging BRRRR Strategy: You're already thinking about the refi route, which is key. If you can build equity and pull out cash through a BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy, that could get you the funds you need for that larger down payment on a multi-family or HUD loan. Just make sure to keep an eye on those rehab costs to ensure you're leaving enough margin for your cash-out.
2. Alternative Financing: Getting into a larger commercial property can be tricky, but sometimes partnering with investors or syndicating deals can help ease the capital burden. If you find a deal with solid cash flow, partnering up might give you more flexibility while still allowing you to control and operate the property.
3. Out-of-State Opportunities: If the local market makes it tough to find larger value-add properties, you could consider diversifying into other markets with lower barriers to entry. For example, in Indianapolis, there are new construction duplexes priced at around $400-450k with strong rental returns. This could allow you to get into a higher cash-flowing property without needing that massive down payment you're talking about for a HUD loan.

If you’re open to discussing this further, feel free to connect—I work in the Indianapolis area, and we specialize in helping investors find value-add opportunities in growing markets. It might be worth chatting to see if it aligns with your goals.

Best of luck in your journey! Let me know if you want to brainstorm ideas.

Cheers,
Ryan Cheek