purchasing 6 family property 14 posts by 7 users

Posted: 09/15/2008 at 09:49AM

Sadora,

That is a very broad question. If you include a few more details, you may elicit better advice. Let me start:

Is the property listed?
Is it a distressed sale?
Are you paying cash or getting financing?
Etc...

thanks

Posted: 09/15/2008 at 05:00PM

Sadora,
Again your question is quite broad, but even more so, so is the answer(s).
First, you need a commercial loan as any property with 5 or more units is considered commercial. Second, you would most likely need 20% down + closing costs and rehab/repair costs. This is just the standard, and not the only option. There are banks that will loan and specific criteria. You may also use seller financing which could be an owner carried second note or the entire note (which would avoid the banks). You can get quite creative depending on your skill/knowledge/negotiating levels. In other words, there are many ways "to skin this cat"

Posted: 09/16/2008 at 09:22PM

Jon makes a great point as well. When I pointed out the 20% down figure, it was not intended to imply that was the standard necessary on a commercail mortgage, only as an example. The DSCR Jon mentioned is one of many figures the commercial lender will scritinize/examine. Also note that in this current lending market, lenders are wanting a higher dscr than the past of 1.2, however, even if you exceed this mark, does not guarantee you will qulaify for the loan. As I said, there are many factors the bank will look at.

Posted: 09/18/2008 at 08:29AM

Not to deviate too far from the question, but...

You seem to need to acquire experience. I highly recommend you go after a single family, 2 unit or 3 unit before diving right in to the 6-plex.

Posted: 09/18/2008 at 01:53PM

There have been several books written on investing in small apartment buildings. I've read a couple, and thumbed through others, so I don't think one is better or worse than the others. I'd suggest finding one or two of these at your library or bookstore and giving them a read.

I'm not trying to dodge your question, but there are a lot of variations on how this goes.

You're into commercial loan territory rather than residential. There's much more variation on such loans than on residential loans. The financing will depend much more on the property. On a SFR, you would typically get a pro-approval based on your personal financial situation. Less the case with commercial. You should speak with some lenders and brokers and find out what programs and terms they have. But you won't get the same sort of pre-approval as for a residential loan. You'll have to finalize the financing once you have a property under contract.

These lenders will give you a better idea of what they will want for reserves. Its been a while since I've discussed this with my broker, but IIRC, it was less than I expected. Seems like it was three months payment plus $100/unit or some such.

You should have your down payment money lined up well in advance. The discussions with brokers should give you an idea of what will be expected. But that, too, will depend on the deal. If the seller is willing to carry a large note, you may need less down payment.

But do find a book or two on the topic. Its complex enough to fill a book, so its difficult to cover everything in a few posts here.

Posted: 09/19/2008 at 09:28AM

Matt, if you can explain how to do deal like this with no money down, please feel free to share here. I for one would like to understand how to pull this off.

Posted: 09/21/2008 at 07:21PM

After putting the property under contract, what time of funds should I have already in reserves (for example, closing costs, repair costs, reserves in case of not enough cash flow to cover mortgage)?"