Multi-family investment property

[Tyrone Alridge]

Does anybody have an ideal on whether or not new Orleans la is a great market for multi-family units. If not then what are some other markets we should focus on?

[Braden Smith]

@Tyrone Alridge Why are you interested in multifamily properties as opposed to single family properties?

If you are looking to buy multifamily properties for investment purposes with 2-4 units you are looking at 25% down. If you are looking at 5 or more units you are now in commercial territory as far as loans are concerned, and a commercial loan can require 30% down.

If you plan to live in one unit you can use an FHA loan and will need just 3.5% down. But, there are other financial considerations when buying multifamily property...

To qualify for a mortgage on a multifamily property, lenders often require you to have cash reserves. Reserves refers to extra money you have in the bank to make mortgage payments after your down payment and closing costs.

This rainy day savings requirement varies by program, as well as your credit score, debt-to-income ratio and down payment. But in general, this can range from three months’ worth of mortgage payments all the way to a year of mortgage payments in cash.

You might be able to use retirement funds or a 401(k) savings toward this requirement. Be sure to check with your loan officer regarding the documentation requirements for using retirement funds toward your reserve requirement.

Check out these articles for more info:

FINANCING A MULTI FAMILY PROPERTY: A BEGINNER INVESTOR’S GUIDE

Investment Property Down Payments: How Much Will You Need?