Super cheap multifamily problems

[Andrew Medici]

Hey everyone! So I have a small issue. I found a good deal. essentially an 8 unit apartment building near pittsburgh. I can buy it for about 40k and it will take about 40 or 45 in repairs to bring it to where I want to. But I am struggling to find a lender that will consider a loan that small for a building with 5+ units. I wanted to know of anyone can point me in the right direction? I am alternatively pursuing a personal loan but would rather finance with the commercial investment loan. Down payments are not a problem, I just feel like I found a great deal but it's too small for most lenders. Any thoughts?

[Joel Owens]

That is usually a local bank or credit union that will look at that type of property. If you are not local to the area that is a concern for them for (boots on the ground) to turn around the property and get stabilized.

If there is a local investor there with a track record you might could JV and split the profits as they already likely have great financing lined up.

To search you can go to the FDIC website for banks and put in area where the property is. The local lender might want you to put deposits there and relationship banking to do the loan. If you can get a bank loan interest only at say 5% that converts to permanent financing when stabilized that could be golden if you want to hold long term. Key is to try and get preset terms that are advantageous to you now when you convert to permanent. Some banks will do that and others will say market when it converts.

Regular lenders this is just too small as for them a 1 or 2 million loan is tiny when they are originating hundreds of millions or billions of dollars in loans a year. A 50k loan would be like a gnat to them and a massive headache figuring out how to get rid of in an out of the box area. They likely would just write it off which is why they will not look at it in the first place.

I have a hard enough time getting regular lenders to do a 1 million dollar loan on a smaller commercial property with my clients. That is why I do not like 5 units to 10 units as it is not considered residential anymore. It's that grey area that is a real paint to deal with. I would rather want a 4 unit or go much larger in unit size. 

If you were buying a portfolio of say 8 different buildings in the same area in a 3 or 5 mile radius then you might could package a portfolio commercial loan of say 100 units.