Suggestions for Financing Small Multifamily w/ Non-occupancy Loan

[Isaac Galli]

Hello!

My original plan was to buy a small multifamily (2-4 units) in my area and househack. House hacking (self-occupancy) would of course allow me to go with a non-conventional, non-commercial mortgage like Homestyle have a down payment of less than 20%.

Unfortunately, the timing might never be right (I'm renting, future tenants' leases might take more than 2 months to expire). I'm sitting in a place where a very good deal might pop up, and a conventional, non-occupancy loan would require me to put a down payment greater than 20-25%.

What can I do to reduce the down payment of a non-occupancy loan? Credit union? Hard money?

Thank you in advance for your suggestions, I greatly appreciate them!

[Patrick Menefee]

@Isaac Galli have you shopped around at local banks & credit unions? Is it a property that is in great condition, or could you add value to up the ARV?

Outside of the usual options like seller financing and partnerships, the other option is to use a personal loan or line of credit to pay for some of the down payment and finance the rest (saw one from SoFi recently that wasn’t bad). However, this would only work in a property where you could either buy under market value (80% of value), a property that you could force appreciation through minor rehab, or a combination of both.

You’d only want to do that if you were positive on your numbers and could refinance to pull most of your money back out.

As a brief example I’m working through now:

4 plex, $200k value. Under contract for $160k

$32k down + closing costs + minimal update = $40k cash paid, I pay $30k with a personal loan/LOC @12% (and have a $128k Mortgage)

I cash out refi after 6 months at 80% LTV ($160k - $128k Mortgage - $30k loan - $1800 interest), and i now only have $10k + refi closing costs left in the deal