BiggerPockets

How about an overview of how financing works for multi family units?

Here are some topics of interest to me... Credit score requirements, understanding how lenders underwrite the loans and what they are looking for, loan to values, subordinate financing, and equity partners...

And whatever else you can share.

Thanks!

Eric,

How many units?
Price?

In case the property won't debt service on it's own we can look at financing that takes into account other personal income and assets. Limit: 1.5m

Seller carry, cross collaterization with another property, borrowing from some other source, and cash back after closing. I've had several conversations with my broker about these sort of deals. He points out the RESPA (?) rules don't apply for commercial loans, so they tend to get more " creative" .

That said, you don't want to get overleveraged. And you do want some cash reserves. Those surprise expenses on SFRs that run a few thousand will end up running $10,000 on a small apartment building.

Jon

Well, I've ended up not trying to do commercial deals right not, so I've not pursued it in detail. But, sure sounds like things that would be considered fraud for single families, like cash back at closing, are OK for commercial loans.

Here's a deal I heard described:

A building listed at $450K. Buyer asked the seller to make the price $470K, carry a 10% second, and give back 30K at closing. Buyer put in a 10% downpayment, making the conventional first $376K. After closing costs (about $14K), putting in $47K then getting back $30K, buyer actually had $31K into the deal.

That makes the " downpayment" under % (($31K-$14K)/$440K). Supposedly totally legit for commercial loans.

Jon

I heard they are starting to get rid of the 95% to 100% CLTV, and if you find a lender that will do that the deal is extremely scrutinized.

That's correct, but at the time of my posting it was still available.

touché! :beer: