Please clarify my doubt
Please clarify my doubt. When we are borrowing money from the bank to buy multiple family appartments. Why are we not paying the principal portion of the loan. Or even if we are taking interest only loan, at some point (3-5 Years) we have to pay back the principal along with the interest rates decided. If that happens, we will never be cash flow positive. How do we do that? Are we ever going to pay back the principal? Please help. I am waiting for your reply.
Thank you
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#1 Real Estate Success Stories Contributor
- Real Estate Agent
- Cincinnati, OH
Commercial multifamily loans can be structured in several ways. Typically you will have an adjustable rate mortgage that is fixed for 1-7 years, the longer you lock the higher your rate typically. You will then have an amortization schedule, the longer it is the lower your payments each month, but also the less principal pay down per month. These are typically 20-30 years, sometimes up to 40 on larger deals with Freddie mac financing. Lastly, there is typically a balloon period meaning when you have to pay back the note, or sell, or refinance the property. This is typically 5-10 years for most commercial loans. Obviously there are countless other options and variables but these are the typical term ranges. You can also do an interest only period if you are doing renovations or have construction funds to draw on the loan, usually 6-18 months right now. Hopefully this answers some of your concerns, feel free to connect if you have other questions! Good luck!
Thank you soo much joseph Cornwell. I really appreciate your help. May god bless you.
