Need loan for buy and hold

[Constancia R.]

I spent the day on the phone and got zilch. I am looking to get a loan on a 5 family. Apparently that complicates things because once it's over 4 units, it's commercial. Our credit scores are both good and we can put 20% down (of course we would rather put less!). We have a duplex that's owned free and clear but taking cash out of it won't give us the entire amount we need. I saw a few places online and here on BP that looked promising but when I checked their reviews, they were terrible!

Any ideas? Hard money, anything?

[Jay Hurst]

Quote from @Constancia R.:

I spent the day on the phone and got zilch. I am looking to get a loan on a 5 family. Apparently that complicates things because once it's over 4 units, it's commercial. Our credit scores are both good and we can put 20% down (of course we would rather put less!). We have a duplex that's owned free and clear but taking cash out of it won't give us the entire amount we need. I saw a few places online and here on BP that looked promising but when I checked their reviews, they were terrible!

Any ideas? Hard money, anything?

 @Constancia R. A lot of DSCR (debt service coverage ratio) will lend on a 5 family property. Is the property in Indiana and what is the purchase price?

[David Bilandzija]

@Constancia R. A 25% down payment is realistic for 5+ unit multifamily. Consider taking on a partner if you don't want to pass up on the deal.    Depending on the lender, you may also be required to show 6 months of post closing reserves.  Good luck. 

[Robin Simon]

Like the other commentators have said, you are probably looking at a 25% down payment minimum and 20% will be extremely hard to find

[Dave Skow]

@Constancia R.- thanks ....leverage the duplex for as much as can .....can you leverage your primary home at all ? if you can get some funds from duplex - this will allow you to increase the down payment and getting a commercial loan with a lower LTV will be easier ...try to find out if there have been any lenders on the 5 plex in the past and if so - contact them ...try your own bank ....try the smaller / mid size banks and credit unions that are in the area of the 5 plex- good luck

[Jonathan Taylor]

@Constancia R. Ill reinforce what has been said here. 25% down is realistic in this market, I do not know of a lender who can pencil out a DSCR at anything more than 75. Consider all options, leveraging your duplex or bringing in a partner.

What is the purchase price and what numbers have you run?

[Stephanie P.]

Quote from @Constancia R.:

I spent the day on the phone and got zilch. I am looking to get a loan on a 5 family. Apparently that complicates things because once it's over 4 units, it's commercial. Our credit scores are both good and we can put 20% down (of course we would rather put less!). We have a duplex that's owned free and clear but taking cash out of it won't give us the entire amount we need. I saw a few places online and here on BP that looked promising but when I checked their reviews, they were terrible!

Any ideas? Hard money, anything?

 If the seller would hold a 2nd, you could get in with just 10% down.

[Rob Beeman]

@Constancia R. Can you share where it is located and does it need improvements, or is it turnkey and occupied?

[Michael Kinsella]

You are correct; lenders generally put 1-4 unit and 5+ unit residential investment properties into different buckets.

As others have said, a 25% downpayment is more likely in line with current market conditions.

You can speak with some hard money lenders, but expect for there to be about a 4%+ cost delta (pay about 4%+ more than using a traditional capital source, such as a local bank).