How to get financing for a 6 unit complex

Question

Hello All,

I'm looking into buying a 6 unit property.  The numbers look good, but I was told I would need at least 25% down on the property.  Is it possible to get a bank/lender to finance 80-100% of the investment property?  Thanks ahead of time!

Norman T Eng · Answer

Thanks for the info!  Now how different is it to get financing from a commercial lender?  Will the costs be significantly higher?

Kyle W. · Answer

@Norman T Eng

Hi Norman,

Sorry to completely fail to answer your original question with my first post. Based off all my reading, it's all but impossible to find a traditional lender, or any lender for that matter, to finance 100 percent of your property. In Brandon's Low or No Money Down book, he talks about how the max Loan to Value ratio lenders will allow you to have on your house is 90% and sometimes even less than that. After that, they stop lending based on equity. This is to protect them in case the market fluctuates among other reasons. You may be able to get 80%. I believe USAA has a 20% down payment rental property mortgage. However, it's unlikely that you'll come across a traditional lender who's willing to loan you more than 80% of the property value.

Kyle W. · Answer

@Norman T Eng

I've read Brandon Turner's book on Buying Rental Properties, and I'm currently in the middle of his Low or No Money Down book as well as the BRRRR book by David Greene. Based of my knowledge gained from these men, I'm going to say that I'd need a bit more context before I could give a solid financing suggestion.

However, I don't want to leave you completely high and dry with my answer. So I'll do my best to provide you with something. It sounds like your goal is to get the financing needed to cover a down payment and then let the bank fund the remaining 75%. I have 4 options for you.

1. In Brandon's book Low or No Money Down, he talks about a Down Payment Equity Partnership which is basically where you enter into a business partnership with someone else to help you by funding the down payment.

2. Another option would be to take out a home equity line of credit or a home equity loan on your house if you have any equity in it.

3. A third option would be to consider a Private Lender which is similar to a Down Payment Equity Partnership except that you don't establish a business partnership with them.

4. And my last option for you is if the property needs a good amount of work. I don't recommend this option if you're newer to rental property investing because of all the risks involved. Basically, you can get a hard money loan for the full purchase price plus the cost of rehab. Once 6 months has passed (or whatever the "seasoning period" is for mortgage lenders in your area) and the property is finished being rehabbed, you could secure financing from a traditional lender. Just be sure that 75% of your ARV is equal to the amount you would owe your hard money lender. I say 75% because traditional lenders are not likely to give you a mortgage for more than 75% of the property's value. You don't want to be stuck owing your hard money lender more than the traditional lender gives you.