Financing Your First Deal

[Jose Furman]

Hello All!

My family and I are planning on selling two single family homes we currently have rented. Total cash on hand will be about $300K. Our plan is to do a 1031 exchange and purchase a multi-family property around $1M with either 4 or 6 units.

I am having a tough time figuring out where or who I should speak to about getting favorable financing for a deal like this. As interest rates are at all-time lows, I figured I would get a great deal. However when I spoke to a mortgage broker who explained that any MF property 5 units or over is considered "commercial" and would require significant paperwork regarding historical cash flows and financials and a higher rate. On the other hand any MF with 4 units would be considered a residential loan, but the max that a bank would finance is $510K, otherwise this would be considered a "jumbo loan". 

Any experience on how to best navigate this would be tremendously helpful. 

Thank you!!

[Zack Karp]

@Jose Furman that's partially correct.  Yes, any property over 4 units doesn't qualify for Conventional financing, you would need commercial financing.  A 4-unit or lower qualifies for Conventional financing.

However...

The max Conventional loan amount for a 4-unit in Fulton County is $981,700.  Not $510,400.  That's the max for a 1-unit property.

Sounds like you are talking the wrong mortgage broker.  Run...

Best of luck!