Financing Multi-Family Properties

15 Replies

I was having a conversation with a friend who is also interested in real-estate investing and she informed me that there is the potential for special financing for Multi-Family Properties. Does anyone know the benefits of financing a Multi-Family vs SFR and where I can find more information regarding this?

@Minnae Chabwera Ask your friend for the bank they use. That’s step one in your process. I’d also Google “commerical mortgages” if you’re looking at 5+ units in your target multifamily. The process, lenders, “rules”, etc. there are different. And those rules can vary lender-by-lender since they carry the paper themselves.

What size multi family?

There are drastically different options available for under 5 units and loans over $1mm.

1-4 units for investment

75% LTV (25% down payment)

DTI 45% or less

For best rates 720+ credit

Loan period really up to you. 30 years, 25, 20, 15.

Home has to appraise for agreed purchase price

Pretty simple actually in regards to requirements for the loan. Takes a bit sometimes with all the paperwork shuffling. Inspector, appraisal, closing, getting insurance.

But In all actuality those 3 things up their in my experience is really all it takes.

I’ve yet to break into the 5+ commercial loan space. I’ve been diligently learning as much as I can about it.

Whole different beast

Oh, that may not have answered your question. The benefits to multi family vs single family. Well that’s kinda cut and dry but also hard to say.

Multi’s probably will have higher gross rents. And you’ll most likely make more money.
But insurance will be higher. And also maintenance will be to, if u have 3 units, that’s 3 kitchens, 3 bathrooms.

Single family, higher resale. Only 1 tenant to deal with. They usually pay all utilities.

@Minnae Chabwera from what I’ve seen. 25% is a requirement for investment property. Not only ideal. I think they do 25% for a few reasons. 1 being that They don’t want to see u having PMI on an investment property. And also they want u to have more skin in the game since it’s not your personal residence.

I’ve heard from time to time that people have lenders that only require 20% down. And while I’m sure they’re out their, much less common.

The only other ways I’m aware of to put down less than 25% for MF, would be owner occupancy in one of the units. Usually for a term of 1 year as required per the mortgage. In which case you can put down as little as 3.5% using an FHA loan. But mind you your cash flow will be less and you’ll be paying PMI.

Also just a word of Advice, don’t be tempted to lie and say it’s your personal residence just to put less money down. It can end up bad.

@Nicholas_Weckstein thanks for the update. And yeah, I can even theoretically see how lying would be a terrible idea.

I am actually planning to live in one unit of the investment property. It is good to know the rules whether I live in the property and whether I do not.

I’d also suggest checking your local banks and credit unions. I went with a local bank on a recent purchase and they were .75 better than any other bank out there. It will pay off to start building those relationships.

@Nicholas Weckstein were you able to get low down payment financing on an owner-occupied (primary residence) 2-4 unit multifamily? I’ve been told by lenders that even if you live in a unit, the down payment must still be 20-25%, even if FHA/FNMA.