How to finance small Multifamily property

Question

Hi, I've been sending out direct mail Looking to purchase a property under 10 units. I got an answer and have been communicating with the owner of a 6 unit building. I’ve been doing my research, but what are my options for a long term commercial loan on a property for $900,000. Me and the owner even discuss him supplying part of the down payment. I’m in the process of putting together my due diligence and my term sheet, but I still need to figure out my financing. This Would be my second property, the first being a duplex so I'm new to the 4+ unit space

Corby Goade · Answer

Once you hit 5+ units, the leding game changes, so if its 6 or 10 or 300 doors, it doesn't matter, you are in the commercial lending zone. Without getting in to the nitty gritty, those loans are not Fannie or Freddie products like most residential loans, so you will find much more variety in the products and pricing that are available.

I'd make at least 8 appointments with local credit unions and smaller local banks and just fill my head with all of the knowledge I can. There will be lots of options and there are going to be pros and cons to each. Get a feel for what might work for your situation and this specific property and dig deeper with one or two of the loan officers that you get good vibes from.

Good luck!

Jay Bisaga · Answer

It's definitely possible to get a long term (5-7 year balloon with a longer amortization) loan for the property, but under 1M it's most likely going to be recourse -- meaning the bank can seize personal property to pay back the note if it defaults. Additionally, on long term debt the lender is going to want to see the right DSCR, typically at least 1.25

A decent commercial mortgage broker will be able to find the kind of loan product you're looking for.

Michael Wentzel · Answer

I've never gotten a 30-year fixed mortgage on a commercial loan, but maybe they are out there.

Ryan Stuckey · Answer

It's not very common, but 30-year fixed rate commercial loans on 5+ unit properties are out there

Michael Wentzel · Answer

@Bradley Rieger

That's great that the owner might be willing to finance some of the property for you. If he or she will take a down payment and hold a note for the rest, that is ideal, like @Stephanie P. shared.

If not, I would start looking for local banks in the community that work with real estate investors. It might take 10 or 12 phone calls, but if you're calling the smaller banks you will usually find a few that will consider working with you.

If you know other investors in the area, you could also ask for recommendations for a lender.

Dawson Rosenberg · Answer

yesssss! I would love to share advice with you if still interested ;) message me buddy!

Jason Bowden · Answer

Hey Bradley, I've got a few lenders in mind that might be helpful. I'll DM you.

Maria Checchin · Answer

I know private lenders and hard money lenders that would love the opportunity to streamline that process for you! Connect later if your ever interested in Knoxville, TN multi family complex.

Bradley Rieger · Answer

Thanks for all the responses

I'll make sure to do my research before I decided on a lender

How to finance small Multifamily property

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