How to finance 6 plex deal?

Question

Hello - I’m interested in a 6 plex priced at $490,000. After 20% down, the loan value will be around $400k.

Since it’s a 6 plex, regular FHA will not be applicable. For commercial loans, the minimum amount to borrow will be 500k?

Any suggestions to finance this deal other than hard money lending?

Erik Estrada · Answer

Hey Venslaus,

Most commercial lenders are capped at 75-70% LTV max for any 5+units. Do you own any other real estate? A lot of commercial lenders do not lend to first time buyers.

Dennis Muno · Answer

Hello Venslaus,

It's been over a month since you posted this. However, if you're still searching, I would recommend you call up a local mortgage broker. Usually, they have 50+ banks/lenders for them to shop lender offers for you. They should be able to take your financing request as well as info like your FICO and financials to lenders for them to produce financing bids. Once the financing bids come in you should carefully compare each financing bid, run up your numbers and decide which offer would work best for you. I think you can start there if you are still searching.

Alex Bekeza · Answer

@Venslaus Arokiaraj There are options for commercial below $500,000 but minimum down payment would be 25-30%.  Even hard money is likely to want 25% on 5 + units right now.

Robin Simon · Answer

Check out this BiggerPockets Article on Multifamily DSCR Loan options which can be a nice option here!:

https://www.biggerpockets.com/...

Mike Klarman · Answer

You need more money than you think.  Your downpayment will be 30% at least and they will want to see at least 9 loan payments in reserve, plus it would have to DSCR well enough, at lest 1.2 for a 5+ unit.

Amir Khan · Answer

@Venslaus Arokiaraj Zane is correct, there is no minimum amount for commercial loan. However, some lenders have their requirements and may not loan on commercial loans below a certain amount. Did you underwrite the 6 plex? How are your numbers? What do you plan to do with the property? What is your exit strategy? If you are familiar with the underwriting process, then the lender would like to see these. This will tell them that you know what you are doing. In past, I've found commercial multifamily lenders by searching on google within the area where the property was located. Hope that helps..

Zane Cress · Answer

A local bank or credit union should be able to finance this deal, you need to ask around a few places that are local and show them numbers that make sense. They will likely want to see a return of 1.2 or more before loaning on this. There is no rule that "commercial" has a minimum amount.

How to finance 6 plex deal?

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