First Multi Unit Purchase

5 Replies

Hey Everybody!

This is my first post so its an introduction/ question. I have found a great deal. It is three duplexes being sold in one transaction. My question is do I need to obtain a commercial loan since this is over four units or can I still qualify for residential since it is three individual buildings? Also this is my second deal (first one is a live in flip that I am currently in the middle of) so I am also wondering if it is a good idea to expand that rapidly? If my offer is accepted on the duplex I will still have to obtain hard money which will be an uphill battle and I will need some encouragement!

Thanks in advance!

@Ryan Simpson if the three duplexes are being sold in one transaction, you are essentially buying 6 units, which I think would make it a commercial transaction. You can negotiate with the seller to have it split up into 3 transactions, one for each duplex. However, you need to make sure with your mortgage lender that you can close on 3 transactions at once using a residential product on each. Otherwise it would be more prudent to get one commercial loan. As a caution though, you need to get a commercial blanket mortgage if you are buying three separate duplexes. Make sure your lender is aware of that! 

The strategy would be similar to a BRRR. All the units are currently rented below market and need quite a bit of work. Ideally I would like to take the rehab one duplex at a time and keep the other tenants in place. Since I would be only doing one duplex at a time, a true BRRR strategy would not work due to the long rehab time frame. Any suggestions on how to handle the financing of the rehab?

Thanks again for everyone's input.