Transitioning from buying a Single Unit properties( SF, Condo, etc.) to Multifamily

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Transitioning from buying a Single Unit properties( SF, Condo, etc.) to Multifamily

Elie Merisier
Real Estate Agent · USA, FL · Member since 2022 · 42 posts · 20 votes

Hi, I hope you're doing well.

I am planning on purchasing a single-unit property either a Condo, Single Family or Townhouse as an Investment Property. 

Questions:

1. I wanted to know when it comes to financing with a bank, If I have want to purchase a Multifamily as my next property as a primary residence to house hack, will the bank give me any difficulties because of the transition from one property type to another?

2. And if so, what are some available options in terms of more flexible financing terms to transition from a Single unit to a Multi-unit or Multifamily property?

Thank you,

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  • Jenni Ellis
    Property Manager · Member since 2018 · 174 posts · 185 votes
    3y

    Sounds like a good plan! Couple things to keep in mind, the bank considers anything over 4 units as a commercial deal. Your multifamily would need to be under this if you want to include this as your primary residence and rent the other units. 

    As long as you have lived in the single family unit and not buying it as a primary residence and quickly turning it into a rental, the bank shouldn't have any issues with your plan (pending you are properly qualified to hold the single family and purchase your next investment.) 

    If you find a multi-family property another financing solution could be owner financing. It could get you into the property, while also getting your single family rented and showing cash flow before you try to go to the bank for a loan.

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  • Ryan ThomsonBusiness Member
    Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
    3y

    @Elie Merisier great plan! To answer your questions: 

    1. They will not give you a hard time for switching property types. However, there are some challenges to multifamily lending. If you go with a triplex or fourplex the lender will do something called a self sufficiency test. In order to pass the self-sufficiency test, you'll need to prove that 75% of the rental income you're likely to receive will exceed the full monthly mortgage payment. If not, you will have to put 15-20% down. Their is no self sufficiency test for a duplex. 

    2. If you are a veteran there is no self sufficiency test for a VA loan. Other than that, its tough to qualify for a 5% down fourplex right now.

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  • Elie Merisier
    OP
    Real Estate Agent · USA, FL · Member since 2022 · 42 posts · 20 votes
    3y

    Thank you for the replies. It really helps! 

    0Reply
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