24 Unit. Residential Mortgages or Commercial Loan?

[Anthony Gayden]

Let's say there was a 24 unit apartment complex that you wanted to buy. The complex is actually composed of 6-4 plex buildings all on separate parcels. Would it be better to finance through residential mortgages or through a commercial loan? 

Obviously you would probably get better terms financing it with residential, but I am curious if the rules of forced appreciation still come into play when financing through this method. 

[Christopher Telles]

"but I am curious if the rules of forced appreciation still come into play" not sure what that means. Anyway, how you finance these units will really depend on what your plans are for the units.

Since you have separate buildings on separate lots you may want to consider financing each with a conventional loan. This would give you the flexibility to hold onto some and or sell less than all at opportune times to sell. 

If your goal is to operate and manage all the units as one large complex and package them for sale as one complex some time later then you might want to consider obtaining a commercial loan at today's low interest rates. A buyer can then assume the loan later after rates have risen and you'll make your property more attractive Vs competing properties in a higher interest rate environment.

Create a short term and long term business plan for these assets and this should help guide your decision on which way to lean in financing the acquisition. You might also want to price the cost of each option. You'll need to pay for points, and appraisal cost for multiple properties Vs a commercial appraisal.