Would a bank finance MF with a 50% LTV if rent paid mtg?

[Dave G.]

I'm barking down this whole creative financing avenue and trying to find more about what banks will and won't do. Say there is a property currently cash flowing x and it has 3(?) years of history to show consistency. You put an offer to buy it for $50k. Your appraisal comes back at $100k. You want a $50k mortgage from the bank and your cash flows (x) are enough to cover all expenses related to the mortgage. Would a bank take this? It seems like a slam dunk for the bank. Is this a "in what capacity are the banks lending" question (investor v homeowner)? Would being 5+ units (multi family) have an affect on the decision?

[Eric Schleif]

I would suggest calling a couple of credit unions, local banks, and regional/national banks. See what products and requirements they have to get an idea of your options. Most lenders would look at 5+ unit asset as a multi-family deal.

Without knowing much about the subject property, I would imagine you are looking at general/ballpark terms of 70% to 80% LTV, 25 year amortization, with a rate between 4% and 5%. I work mainly in major markets and can tell you that the larger banks on large multi-family deals like to see at least 2 years seasoning before they will offer a cash-out refi. I wouldn't be surprised to hear a credit union or local bank is more flexible in this respect.

You also say the "rent pays mortgage". Just to be clear you will have to have adequate debt service coverage, usually 1.25 times the net operating income (not the rent) of the subject property. So you would need roughly $6,275 of NOI assuming a $75K loan with 25yr amortization at 4.5%.

Hope this helps.