Financing multi-family, no usable income

[Scott P.]

Hi,

I am planning on buying one or more multifamilies, to buy and hold. I do not currently own any real estate, aside from my own home.

I could pay all cash for a multifamily, but would prefer to finance, if I can get a rate to make it worthwhile (I figure that it would need to be less than my expected cap rate). I would be looking at about a 50% LTV ratio. My credit score is good (720ish).

The problem is that my income isn't typical; the biggest problem (and why I cannot refinance my personal mortgage) is that I have no "guaranteed" income (stable income that is expected to continue). Some years, my income is great; other years, there is nearly no income. It works great for me, but not for banks.

Is it possible that I could get traditional financing (e.g. based partially on the expected income from the property)? Is there alternative financing that might come into play (realizing that in my case it would not make sense for me to pay too high an interest rate)?

I'm guessing that seller financing might be an option. Are there any other alternatives that might work (e.g. assumable mortgages, although I expect I would have to qualify for those)?

Thanks in advance for any responses.
-Scott

[Account Closed]

Actually it sounds like you have three issues to contend with. Commercial lenders often look at management experience as well as the ability for a property to create cash flow. In your case that would also be looking at your personal ability to pay back the loan.

You might want to consider purchasing a multi with cash and build some experience. With a couple of years experience on a profitable property you could probably get a cash-out refi. The next commercial property purchase might then be more about property's ability to pay back the loan.

You could also consider taking on a partner that can get commercial financing. Having the cash for the down payment and the ability to manage the property would put you in a good position.