How to finance a duplex fully rented out

Question

My agent told me about a pretty good deal on a fully renovated multifamily. Both sides are rented for the last 2 years. I just don’t have a clue how to finance it. I don’t have the $60k for a hard money or DSCR

Ashish Acharya · Answer

If cash isn't there for hard money or DSCR, a couple financing paths are worth exploring before writing this deal off, and each one carries different tax implications worth knowing upfront. A conventional loan, if you qualify, typically needs less down than hard money and the interest is just a straightforward deductible rental expense once it's rented, which it already is here since both units have tenants in place, that actually helps you qualify since the lender can use existing rental income. Seller financing is another option worth asking your agent about given it's already fully rented and stabilized, sellers are sometimes more open to carrying financing on a property like this, and the interest you pay is still deductible the same way a bank loan would be.

If you do have any equity in another property or a retirement account, a HELOC or a self-directed IRA are both worth a look too, though each comes with its own tax wrinkles, HELOC interest deductibility depends on tracing the funds to this specific property, and using retirement funds for real estate has strict rules around prohibited transactions that need to be followed carefully or the tax benefits of the account itself get wiped out.

Happy to connect!

Joseph Cacciapaglia · Answer

There aren't really low down payment option for non-owner-occupied deals these days. Finding a partner to provide some or all of the down payment is one of the only options I can come up with, unless the owner is willing to provide favorable financing themselves.

Vijay Friedman · Answer

@Rudeka JennetteSince the property is already renovated and fully rented, I'd first make sure you explore all of your financing options before assuming you need the same amount down with every lender. Requirements can vary depending on the loan program, the property's cash flow, and your overall borrower profile. It may be worth talking with an investment-focused lender to compare what's available.

Rudeka Jennette · Answer

I’m in Virginia. This particular property has both sides already rented so I wouldn’t be moving in. The 60k is the 20%down most lenders ask for

Joseph Cacciapaglia · Answer

When you say you don't have the $60K for a DSCR loan, are you assuming a 20% down payment, or something else? Are you buying the property purely as an investment, or would you move into one side once the tenant moves out? Also, it would be helpful to mention what state you're in, because not all programs are the same in each state.

How to finance a duplex fully rented out

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