Residential Loan Vs Commercial Loan

[Cole Farrell]

Hello, I am about to purchase my first investment property but I am slightly wary on which loan I should use. My plan is to acquire an empire as I am sure is many others. Having this goal in mind, I created an LLC and started searching for someone to finance my first property. I quickly realized obtaining a commercial loan with no history is near impossible. After talking to a few banks, I searched for residential loans instead based on not having the 5yr bullet, higher down pay etc. Today I received a call back from one of the commercial lenders saying they would do the loan. The terms are along the lines of 6%int, 20% down, 5yr fix over 20 years total. This is the only offer I have received yet. To make it a bit more complicated, I am 21 years old and therefore have barely any substantial income. I am looking for advice if this is a good deal, and will benefit me or if this is a dangerous path (The loan type). Thank you so much.

[Jaysen Medhurst]

@Cole Farrell, those terms aren't terrible for a commercial loan, given your new to the game.

If you find a good deal that will cash flow appropriately with those loan terms, then get to it. You should keep in mind that most commercial lenders will want to see 6 months of reserves at the time of closing.

Why not take a different route and try house-hacking a multi-family? Something like this, purchased with a FHA 203(k).