Looking to house hack on a 6 unit apartment building. Financing?

[Josh Turansky]

I have identified a 6 unit apartment building where I would like to house hack. The asking price is $1.5m. I have $40k in savings. What is my next step to get this financed? The numbers make sense once the building is purchased, but I need help understanding the upfront capital. 

[Jon Schwartz]

Originally posted by @Josh Turansky:

I have identified a 6 unit apartment building where I would like to house hack. The asking price is $1.5m. I have $40k in savings. What is my next step to get this financed? The numbers make sense once the building is purchased, but I need help understanding the upfront capital. 

Josh,

A six-unit building is a commercial building -- as opposed to residential multifamily, which is 4 units or less.

Commercial and residential buildings are financed differently. Residential financing includes low-dow-payment options like the FHA loan, which has a minimum down payment of 3.5% for an owner-occupied multifamily.

Commercial financing typically starts at 20% down, and you're more likely required to put 25% or 30% down. There's also no advantage to living in the property. In fact, to satisfy your lender, you'll probably have to pay rent to the LLC you form to own the building.

For househacking, you should familiarize yourself with the FHA loan and focus on duplexes, triplexes, and fourplexes.

Good luck!

Jon