80% LTV on Multifamily

[Christian Locke]

Hello, 

I was hoping to learn from any one who may have been doing the BRRR model on multifamily properties (4 units). Specifically around doing the finance piece. I know Multi family vs. Single Family homes ARV calculations differ based on the units income. But, ultimately trying to learn more about:

-What is the best way to calculate the ARV with or without tenants (since we want to cash out refinance immediately since we will be using OPM) and it be imperative to refinance asap.

-Is there any difference in seasoning periods?

-Do you need to be prepared for longer holding costs when doing a BRRR on a multifamily vs single family?

- Is there any differences in the % value you can cash out?

- Do costs differs?

If any one has experience conducting these type of deals or experience in financing them it would be great to hear from you. 

Thank you for your time. 

[Stephanie P.]

Originally posted by @Christian Locke:

Hello, 

I was hoping to learn from any one who may have been doing the BRRR model on multifamily properties (4 units). Specifically around doing the finance piece. I know Multi family vs. Single Family homes ARV calculations differ based on the units income. But, ultimately trying to learn more about:

-What is the best way to calculate the ARV with or without tenants (since we want to cash out refinance immediately since we will be using OPM) and it be imperative to refinance asap.

-Is there any difference in seasoning periods?

-Do you need to be prepared for longer holding costs when doing a BRRR on a multifamily vs single family?

- Is there any differences in the % value you can cash out?

- Do costs differs?

If any one has experience conducting these type of deals or experience in financing them it would be great to hear from you. 

Thank you for your time. 

For optimal financing, you'll need to wait 6 months from the purchase date to season title. That's whether you opt for conventional financing or DSCR or an asset based approach. On a 4 unit with conventional financing, you'll be capped at 70% loan to value while you'll be able to generally get 75% with a DSCR type loan. DSCR is an acronym that stands for Debt Service Coverage Ratio and those loans require no income verification (no tax returns, paystubs, W2's etc...) and the rate is based off the guarantor's credit and the lease amount.

I don't think you need to be prepared for longer holding costs with a multi family if the renovations are all done at the same time.  Sometimes, you'll have holdover tenants and that can draw the renovations out, but at least (you hope) they're paying.

Hope that helps

Stephanie