Searching for Niche Loan Products

[Dan Bitner]

Hi BP Team,

I'm looking to make my first small multifamily purchase in San Francisco this year.  I'm lining up my financing but want to ensure I'm aware of the different mortgage programs being offered, and those which could be beneficial for multi-family.  So far, I have three:

1/ VA Loan (CalVet), as low as 0% down, no PMI, can roll closing costs into the loan, 6%, up to 4 units

2/ Citibank Homerun program, as low as 5% down, no PMI, $7500 towards closing costs, 5.75%, SFH & duplex only. Must buy in a low or moderate income census tract

3/ First Republic Eagle Community loan, 20% down, $5K towards closing, 4.75%, up to four units. Street-by-street address qualification (if not a designated area, interest jumps to 5.15%).  There is a cash deposit requirement against the value of the loan (10-15%)

If folks are aware of any other niche products/vehicles, I'd be very interested to learn.  Thanks so much!!

[Tyler Warrick]

@Dan Bitner My pleasure. It's refreshing to see someone who's actually thought things through! 

Acquisition: I dig the strategy. It's inevitable that rates will drop (who knows when -- that's the real million dollar question). I don't like banking on the fact that rates will drop -- because the timeline of when rates drop might not meet your timeline for refinancing. For example -- owner occupied properties will always get better rates than investment properties. If you decide to house hack and later refinance your investment properties, who knows if rates will make sense to refi. This is why I'm a fan of FHA/VA and the streamline refinances (before exiting into another house hack) because you can still classify that as owner occupied.

Exits: This is solid. I'll challenge you to come up with a plan to save for repairs/upgrades -- but that's a different conversation and outside the scope of what you're asking. Even if you aren't cash flowing right out of the gate (but not bleeding money, at the same time), you could use these rentals to offset your income come tax time. Looking into Cost Segregation once you formally move out of the property could also lower your tax burden (only bringing this up as you high a high paying W2 where you could benefit from write offs without shooting yourself in the foot for purchasing power/DTI).

I'm licensed in CA and can do Conventional, FHA, VA, USDA and all Non-QM loans in the state. Feel free to hit me up in a PM and we can talk more offline, if you prefer. From a brief super high level overview -- I like a mix of both FHA and VA for your plans. You can typically only have one FHA loan at a time (unless the properties are more than 50 miles apart). You could take advantage of both -- I'd recommend going with the loan program that gives you the lower rate/better terms to start as to make it easier/less stressful for your first hack. Once you've got one under your belt, it makes the second one easier. Additionally, I don't see you running into many issues getting qualified. Obviously I haven't seen any of your financials, but you'll be able to use market rents from the other units to offset a portion of the mortgage. As long as you don't have a couple Lamborghini's financed -- I think it's safe to say your approval odds are high.