How to get 2nd loan with little money down. Help needed ;)

[Maciej G.]

Hey guys

Last year I purchased my first multifamily building with FHA loan, as I am preparing for my second purchase I am hitting major roadblock from lender side. It turns out nobody wants to give me a loan for less than 20% down for multifamily property investment. I am still new to this but if that is the case how is scaling possible in those circumstances, multifamily homes in Chicago cost +350k, my downpayment for a multifamily would have to be around 100k which is something I wont be able to accumulate for a while.

Is there any way, that you may know about to obtain a loan for less than 10% down? I currently have FHA and moving it to commercial is not possible due to many reasons.

Thank you very much for any kind of help 

[John Warren]

@Maciej G. having an appraisal done will not trigger any type of issues with the non conforming units. If the units are not legal, they won't be counted on the appraisal which obviously will hurt your case. 

In terms of trading up, there is no specific strategy you should follow. Always think about your return on equity (ROE) and if your ROE gets to be too small, consider selling and trading the equity into a bigger/better property. This allows you to focus on getting a strong return on your equity. 

This is one of the main things people miss here on BP. There is way too much focus on year one cash on cash returns (which rarely materialize) and almost no focus on what happens after year 2. As you own a property for a while, even a good property starts to yield less and less as a function of your return on equity. That is when you know you need to sell in order to trade into a larger property.