my first investment / multi family

[Shimmy Yose]

Hi biggerpockets! This year i decided that its a time to start investing in a multi-family as a first investment in my life. Why? Because i wanna start bigger. I know many investors here are very professional and i would like to get a little help from you guys. So here is the story. Im 27yo and i moved from other country 3 years ago to the USA , my credit score is 700+ but its not long enough , its about 10months old. Im trying to work hard to get the credit the best i can like leasing a car and use a credit card. I saved 100,000$ and i feel like im ready to buy a multi family property around 70k-90k each unit. My questions are: 1. Any recommendations how i can get a loan/mortgage with that kind of credit score(700) for investing? 2. Can you guys tell me in a short story what is the process to get a loan? Should i go to the bank first to know how much they can lending me or to pick an investing first and than i should go to the bank? I just dont know what is my average property price that i should look for without knowing what is the loan that they will give me. 3. What you guys thinking about Florida multi-family market? What you guys thinking about Philadelphia area? What you guys thinking about Houston ? 4. Any other states/cities you guys recommend me to take a look for multi-family investment? 5. What the most important questions to ask the seller about the property ? 6. What is the solution if i cant get a loan from the bank because my credit score? 7. THANK YOU SO MUCH !

[Marc Izquierdo]

How big of a multi family property are you looking to get into? If you’re looking at 5+ units, you’ll need to get a commercial loan. Little bit higher interest rates and amortized over 15-25 years or so. From what I’ve heard (I haven’t purchased commercial yet) the lenders look more at the property than your actual credit score. I would think 700 is fine despite the short time period.

I would pick a few lenders and just ask them what info they can share about their commercial loans. Tell them your intentions and they should be able to give you round about numbers. From there you can window shop who your likely lender will be. Once you have it under contract, you can finalize your financing. It’ll actually be written in the contract as to what type of financing and at what interest rate your going to get, which is why it’s nice to have talked to some lenders beforehand.

As far as how much you can afford, it’s going to come down to what your down payment is. If you have 100k to put down, and the lender on a commercial loan will want to see 25-30% down, you’ll likely be able to purchase something in the 400k range. If it’s a residential property, they’ll want to see about 20% on average so you’d be looking for a (at most) 500k 2-4 unit building.

I was looking for months in NE philly and it was frustrating. Everything was overpriced and people were buying up properties that wouldn’t cash flow unless you bought all cash (but at that point your return is like 2%). So I know NE Philly is tough right now.

Some of the most important things to ask the seller are to provide you with income statements/ profit and loss statements. You need to know what the property is producing and how much it costs to do it. The bank (if commercial) will especially be interested in this because this determines how much risk there is in the property. Once under contract, you can get estoppel agreements from each of the tenants to make sure that what the seller is telling you is true. Always ask them why they are selling.

I’m about 30 min from Philly up in Bristol Borough where I’m DIY’ing a duplex I bought in December. Should be wrapping that up in the second half of this year. After that I’m looking to buy bigger multifamily 5-15 units. I’m starting to look for investors. Keep in touch if your still looking by the end of the year and/or if you want to go bigger than what you could do on your own.