Big mansion converted to 9 units
Hello all!
I have a little question… I have stumbled upon a mansion that has been converted to a 9 unit. When talking to a lender, what are the possible loans I could get? The lender said that I wouldn’t be able to get a long term and mentioned something about a ballooning loan? Does anyone have any experience or insight into this type of deal? Thanks.
@Benjamin Robinson a balloon loan does not fully amortize over it's term. Therefore, at the end of the term you will be responsibile for paying the remaining principal. Many investors that use a balloon loan plan to refinance before their term is over or sell the property in order to pay for the remaining balance. I don't advise going down this route unless you've had prior experience with this type of financing or at the very least have all your ducks in a row for a 5-7 year period. With a nine unit property, your options may be limited only to that of a commercial loan. Hope this helps!
Thank you! Would it matter that this is a old mansion and converted, as far as getting a traditional 30 year? Or would I have to go commercial since it is a nine unit place? Thank you for the information!
Or is there a podcast about this sort of thing? Thanks
@Benjamin Robinson First thing I would check is if it was legally converted. Make sure they got proper permits and paperwork for the conversion. If all that checks out, this type of deal would probably have to be funded by a commercial loan or maybe a private loan. Interesting find.
Well if anyone anyone would be interested further just Inbox me, this may be too much for a first timer, but it is definitely something very interesting!
@Benjamin Robinson
Ballon mortgages are typically commercial mortgages. Ask your bank if you can refinance before you owe back the whole principle. This can get more complicated than a residential mortgages but less restrictive. Ask your lender more about it for educational purposes. You could utilize this loan in the future.
@Benjamin Robinson You will need to get a commercial loan for anything 5 units and above unless you can get the owner to finance it for you. Commercial loans are typically for 20-25 years adjusting every 3-5 years on rate and may not be fully amortized. What that means is you will have a ballon payment at the end so you will need to refinance. You can get fully amortized commercial loans, try a local bank for your area. Commercial loans will be decided based on the income of the property and your personal DSCR. Hope that helps.
The age of the property may impact financing and insurance but usually insurance more than financing.
What would be some important documents to ask for a deal like this in the beginning phase of this? To help get a bigger picture of the expenses and rental history?
Put down the first chunk of change to get an apprasial and a HELOC secured to be able to offer a deal for the property! Thanks everyone for the support and for reaching out! Any information in regards to bigger properties is much appreciated!
Thanks again
B
@Benjamin Turner You want the rent rolls and expenses. You will want to see leases eventually. Make sure you include all expenses for example snow and grass are often forgotten., If you pay utilities you want to see actual bills you pay. Hopefully electric is tenant paid except common areas. If you pay heat they may have a running invoice for oil/ gas the last year or you could call the gas company for an average. Don't assume you will pay the same for insurance. For 9 unit you will want to see all units and for conversions like this you don't have cookie cutter units. Have you already done an inspection?
Can i ask for all this before any deal is made? I figured I could get the bill invoices. But I heard something about the tenant estoppel certificate? Would that be something I can get before I commit or only after a contract has been signed? This is an old house that is converted into units. I don't it is separate bills... I will most likely be paying all bills.
@Benjamin Robinson you should definitely ask for the rent rolls and current expenses. Is this an MLS or a private deal? If it is MLS the relator should have some of this readily available. If it is private ask the owner and how pushy you just have to decide based on your current thoughts on the deal. As far as where in the deal you are it seems like you put money down? and are working on a HELCO? You usually have a price agreed before money down. I would want information before making the offer. Estoppel is what the tenant signs to verify the security, rent ect. You get those before close but not usually before offer.
No deal has been made yet. I’m securing financing for both down payment and for the loan itself. I do have a rent roll, but it is hand wrote on a ripped in half piece of paper…. The tenant situation seems worse and worse everyday. I will probably ask way below, as the available comps show it being very over priced, realtor says. So I plan on, upon getting deal for the price I want, I would move everyone out ( I think they are lying about income of property as it is family members “renting”) and Reno at least three and get them ready and move up the property from there… if all goes well
Are they divided into 9 units with 9 kitchens and basically 9 apartments? Most lenders have 600 sq ft minimums per unit, so you'd need over 6,000 sq ft (account for hallway, foyer into building, etc).
