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Updated about 10 years ago on . Most recent reply
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Need help with financing for buying apartment complexes?
Hi everyone, brand new to this. I've got a great income, great credit score, but no home ownership experience and no knowledge regarding financing options for buying apartment complexes. Here's the situation:
I'm a security contractor in the Middle East. Really low cost of living since I'm in company housing with a company car (a freaking Ford Taurus when people are shooting at us at gas stations) plus a rather nice paycheck. Even with both of these things I'm frustrated with how long it will take to save up a 20% down payment on a $600k apartment complex in Florida. I've talked to a mortgage guy and all he would tell me is that "someone else" handled that kind of financing but he wasn't terribly helpful after that. So I need some help understanding what specific options are available to me for purchasing apartment buildings. I guess I'll just ask a bunch of questions here and see if anyone bites:
1. Anyone know any ways to get apartment properties for less than 20% down?
2. Can anyone tell me what types of loans I should be researching?
3. Anyone know a good real estate agent in Florida who deals mainly with apartment buildings?
4. Are there any "first time buyer" perks that I can cash in on when going after apartment complexes?
5. How can I keep the monthly payments on my financing lower, so as to make the property more profitable?
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![Nathan Emmert's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/87100/1621416339-avatar-nemmert.jpg?twic=v1/output=image/cover=128x128&v=2)
Once you pass 4 units, you move into commercial lending... a completely different set of mortgage guys/brokers in that world.
Yes, you can get in with less than 20% down. I believe a typical commercial loan will be at 65% LTV... but in the commercial world the lender may allow a seller carry back of some or all of the remaining 35% with a 2nd position loan/mortgage/lien.
Things to know about commercial loans... they'll have shorter amortization (generally 20 years versus 30 on residential)... higher interest rates (generally a full point higher)... will be variable versus fixed... and will likely have a balloon payment.
I don't know of any Florida realtors but you want to look for a commercial realtor. Do enough searches for commercial real estate and I'm sure you'll find a few who specialize in it down there, it's a very different market from residential.
I don't know of any first time buyers programs... you aren't investing with owner occupied as your competition, you're in a purely investment world in complexes.
Good luck keeping your payments low. You could accomplish that two ways... one would be to make a huge down payment... less financed, lower payment. The second would be to buy a severely depressed property. If you buy off a valuation from a $200,000 GOI and somehow turn it to $400,000 GOI, your mortgage is going to be smaller relative to the new income.
Personally, sounds like you're trying to run before you walk. I'd stay residential until you know what you are doing. You can buy a handful of 2 - 4 unit properties for the same $600k, can buy them in series so you don't need the full $120k down payment before purchasing the same one. You get far better financing terms with residential mortgages... and there's no real down side as a $600k complex won't be large enough to give you any real economy of scale. The 5 unit to 60 unit complexes are sort of no mans land... crappy terms but not large enough to get the economies of scale investors want.