All Forum Posts by: Carlos Enriquez

When I was searching for an investment property, I was told that up to 4 units is considered multifamily residential and 5 units or more is considered multifamily commercial.  They told me it had to do with lending definitions.  Obviously, one unit is a single family residence, although I've seen many families in one home, but that has no bearing on the nomenclature.

I just bought a duplex, and it's described as multifamily residential.

I should say that this is the first investment deal that I'm trying to pull off.  I trusted my realtor to use the proper form since I'm not familiar with them yet.  As I progressed through my due diligence, I found the contract missing the lease contingency clause.  I've insisted on reviewing the leases before I remove any contingencies, and that's where we are at the moment.

I forgot to say that there is no language in the Form 21 contract that stipulates a lease contingency.  I would like to see something that says I can withdraw if the lease sucks.

Form 20 does have that clause.  Wondering if they didn't use it because the seller may be hiding something.  I'm very suspicious about this, as no one is forthcoming with much info.

I'm in contract for a non owner occupied duplex in Washington State that the seller renewed one unit for a year at market rate and the other unit for two years at $250 below market rate, just before listing it.

I've requested the current leases to see the terms.  I don't want to get tenants that have been given the option to renew for 2 years at below market rent for three options or something similar!

The agent won't cough them up until I remove the inspection contingency. Said these are not commercial properties but residential at 4 units or less, so it's a different game with disclosure of tenants information. They even used the Form 21 residential P&S Agreement rather than the Form 20 Multi Family P&S Agreement due to this. I would have thought they would at least use the Residential Income Property Purchase Agreement. Those at least include verbiage relevant to 2-4 unit transactions. I wonder if my agent is ignorant to that? I asked him and he said it's not considered multi family...what?

Is there a way that I can get out of the contract after removing contingencies if the lease terms are asinine?  They told me "no", that I would have to finish the purchase and accept the terms until expired, but that to rest assured the landlord would not have created such terms.  I don't trust anyone's word.  I have to see it with my own eyes.

I'm not sure if I should trust his enthusiasm, as I'm not so enthused at the prospect of inheriting a badly written lease.  What should I do?

Thanks for all the responses.  I had a talk with the realtor and loan broker and I'm thinking that I may pass on this and go with a duplex that I've had my eye on as a back up plan.

Having gone over many threads on this site and using the equations given, the numbers don't make me very confident in this property.

Steve and Joel, you bring up very good points which I will bring up to the parties involved as I am flying to Seattle this afternoon.  I would hope that a rwaltor representing me would point these things out as well and not allow a clint to get in above their head.

We'll see how it goes.  Thanks again.

Hi Albert,

You said:

HI Carlos its because conforming limit for 4 units is 801,950 on a fourplex up to a max of 75% loan to value.  You're correct.  The lender said that too.

By stating 287,500 is 25% means your purchase price (you did not mention) would be 1,150,000.  Absolutely correct.  That's the asking price!

The reason you got countered with more "down payment," is because you've now ventured into "high balance limits." HB limits have stricter down payment requirements of 35% down or more to purchase a non owner 4 plex.  Lender didn't mention this.  Thanks!

I am not sure if your loan officer explained to you correctly but the reason you need that 61,500 extra is because 25% from 1,150,000 leaves  862,500 and since the max loan amount for a fourplex like mentioned above is 801,950. The difference between this and 862,500 is about 60,550. Yes, translating thru this last paragraph, ultimately you are correct, in that I need to cough up an extra 60,500, for a total of $348,050 DN.  It's easier if I just subtract the 801,950 max loan limit from the sale price of 1,150,000 and get the same result of 348,050.

Otherwise the lender would have to adhere to high balance guidelines which is 35% down and trust me you dont want that anyway.  That's right, it would end up being 402,500 instead of 348,050, and you're correct, I don't want that!

There are no 2nd's I know of on a four unit non owner fourplex.  POOP!

Based on the price I assume this to be seattle/king county proper? =D  That's right!!!  :)

So I can come up with the whole 348,050, but it will diminish my cash savings to the point that I may not have a contingency fund in case of emergency for many months.  $300,000 is doable.

Therefore I may not be able to do the deal unless the seller carries paper or I inherit a windfall.  Maybe I'm trying to start out too big and should look at a couple of duplexes that I have my eye on.

Thanks for the help.  Any ideas about how to get an extra $48,050 would be appreciated.

Oh yes, we were trying to get as low as 3.6%, now that I recall.  Perhaps that's the reason I would have to come up with more funds.  Higher rate would translate to higher monthly payment and we were trying to avoid that.  Thanks for jarring my memory Robert.

King County WA

That's what I thought and that's why I'm looking into it, but if the loan to value needs to be less than 75% for some reason, then I'll have to look around.

My credit score is above 800, and they said I'm a great prospect, but since it will be non owner occupied, they have the Fannie Mae rules to comply with about investment properties.  So I'm looking for some creative ways to cough up the difference short of selling off everything I own!  I may have reconsider and start out somewhat smaller in scale.  Thanks for chiming in. One of my employees is from Colorado and she's going back for vacation in June.

Jumping right in, I was told today that I would have to cough up $349,000 DN for a $1,000,000+  4 plex.  25% would have been $287,500, which would have been easy.

So now I'm considering breaking my IRA, cleaning out my savings, and selling off a few things in order to satisfy that.

Anyone know of another way to get the additional $61,500 short of making a lower offer?

The broker was talking out loud about a 2nd mortgage, but said it wasn't ideal.  Has anyone come across this before?

Thanks.