multifamily complex financing

[Troy Young]

I'm interested in a couple multifamily complexes... one has 14 units and the other consists of 4 duplexes with land to build more. I'm looking at around $250k for one and $500k for the other. I contacted my banker at a bank I've been working with for about 6-7 years and have a great history with them. I asked what the down payment would be on something this size and she said it would be 30-35% down. I have been paying 25% down on SFH and smaller multifamily and was expecting the down payment to be less when I move up to bigger investments. Is 30-35% down usual for bigger complexes or what do you see as the normal downpayment?

[Mark Mosch]

Actually - depends on your record and what property you are trying to get as well as where.  Since these properties are larger than 4 units you need to go commercial.  Your amounts are too small for agency debt - you have to be at least $3 million to qualify for the Freddie SBL program, and $5 million for standard Fannie/Freddie stuff.  So you need to find a nice community bank who you can build a track record with.  Community banks, however, should be able to do 20-25% depending on the cash flow of the deal.  The bank will look at your numbers on the deal and tell you what the deal can support mostly based on the cash flow numbers and your track record.  I do 30 year amortization, 20% down all day long with community banks - sometimes 25% if they feel the property is riskier.  I think you can do way better than 30-35% - unless this is in a really sketchy area or isn't cash flowing.