8 plex commercial loan

[Amanda Paugas]

Hi everyone! I am looking to buy 8 units between 3 houses, all side by side. I have never done a commercial loan, so I’m wondering if this would qualify and what a typical loan might look like or require for this type of purchase? Purchase price is 750k, I have private money to use for down payment (how much does a commercial loan usually require for a down payment)? Buildings are all in good condition, no major cap ex anticipated soon. 
thank you for the help!

Amanda

[Andrew Moore]

I would say that you can likely expect to pay about 25% down without an established relationship with the financial institution (shop around maybe you can find less). Typically your terms are going to be shorter (15-20yr vs. 30), however I have had some conversations with lenders recently who are doing longer terms. Interest rates are generally going to be a little higher than traditional mortgages. I would recommend starting some conversations with lenders to establish realistic terms.

Commercial loans generally rely more heavily on the financials to underwrite a property. Having a really good understanding of your terms, operating costs, etc. will help the underwriting process immensely. One thing to consider just getting started is that they may require a personal guarantee. This basically just means you need someone with the assets to essentially "co-sign" with you. Maybe your hard money lender can act as your key principal, otherwise, you may need to find another high net worth individual who would be willing to do that for you (not a guarantee you will be required to have someone for this, but something to be aware of).

This is a little trickier of a scenario with various properties. It may require a portfolio loan rather than a traditional commercial loan, but I would hop of the phone with some lenders and start to get an idea of who might have the best product for this type of investment.