The 25% down dilemma on a Multi-family

[Paul Delgado]

Hello BP, my first post. I have a dilemma where the lender is asking for a 25% down because it's a multi family unit I'm trying to purchase. My cash on cash ROI number is getting destroyed.

My big concern is getting the funds (25% - 60k), the only solution I’m coming up with is borrowing against my 401k. Any help will be grateful. Thanks!

[Spencer Gray]

25% down is pretty standard leverage for multifamily, although you can get up to 85%. If you have to max out leverage to hit your metrics it may not be that great of a deal.

In my opinion, a good deal should hit your cash on cash return metric, mine is around 7-8% in Y1, with standard leverage. Going max leverage should engineer a good deal into a screaming deal. Deciding if the high leverage is appropriate depends on the deal and your tolerance for risk.