BRRRR on a 5-12 unit multifamily

[Ayne C.]

How does a 5-12 unit multifamily BRRRR differ from doing it on a SFH? My partner is concerned if we go into a 5-12 unit, we will be leaving more money in the deal and that it will be a lot longer of a project. How are they usually done? Pay the downpayment with short term money, get a commercial mortgage right away, and then refinance after the units are turned over and stabilized, say 2 years?

Any experiences you want to share?

By the way I'm reading Lindahls book Multifamily millions, so possibly the answer is there somewhere.

[John Warren]

@Ayne C. this is something I overlooked when I started investing. I finished a BRRRR in 7 months with my first four unit property in Lyons, IL. When I tried the same game on a 9 unit in Berwyn, I realized that you have to prove your NOI is strong and that the property is stable. As others have mentioned, it is probably smart to consider being able to refinance the deal in year 3 on a larger deal. You will probably not be leaving more money in the deal though, as you can get 70% LTV these days in both commercial and residential for your refinance.

One other wrinkle is that if your building is large enough, you can qualify for fannie mae or freddie mac loans. As good as conventional financing is, these loans tend to be better in a lot of ways. They are also non-recourse, which is pretty cool.