New to Multi-family and need advice

[Kenn Mccomas]

I want to jump into MF but I'm unsure how or where to start. I hear a lot that its easier than single family and I have found properties I'm interested in but I don't know where to begin on financing, or even how much is required down. It is MF at a duplex but not commercial until over 5 units so is the financing different. I'm playing double dutch right now with it and I don't know when or I guess how to jump in.

[Melissa Hartvigsen]

Hello @Kenn Mccomas,

Whether or not to buy multifamily up to 4 units or a single family is an individual decision. I think you should go through the pre-approval process with a lender, so you know what you are working with. Then use the BP rental property calculator on a few properties in your area to get an idea of what your returns will look like. This can help you narrow down where to focus.

In general, here are some things to know about the difference in lending on SF (single family) versus MF (multifamily).

Single family home: depending on the loan type and property location you have may the following down payment options available to you:

0% VA loan (if you are eligible past military service, or close relation to a family member who served)

0% USDA loan (must be in a rural area, and have stricter debt ratios than other loans)

3% Conventional loan (down payment amount may be higher depending on the debt ratios)

3.5% FHA loan

Multifamily 2 units:

Conventional loans, generally 15% down, unless you qualify for Home Ready 5% down (Fannie Mae product with strict income guidelines. In my market most clients make too much money to use this.

FHA Loans, 3.5% down

Multifamily 3-4 units:

Conventional loans 25% down

FHA Loans 3.5% down payment if the property meets self-sufficiency standards set by the lender. This means that the units you are not occupying must cover the mortgage. In my market, I have never seen a triplex where the property meets the self-sufficiency standard. Occasionally a 4-plex will meet the self-sufficiency standards. What that means is you may have to put more than 3.5% down to acquire the 3-4 unit property.

I think you should start by interviewing lenders and realtors to find a good fit to help you on your journey. The BP "Build Your Team" directory is a great place to start. Look for folks who have experience investing in the way that you would like to, and experience helping clients invest as well. They can guide you and give you great advice. 

Best wishes,

Melissa