I am looking into a 12 unit multi-family property and one of my know lender tells that i need a commercial loan. Being new to commercial loans - is there a requirement that will classify a property as commercial? If yes, can you share any lenders offering the loans along with disadvantages with a commercial loan/property or things to watch out for when buying a multi-family property like this?
Yes, it would be considered commercial if a multifamily has 5 or more units. Residential loans for 1-4 units. Commercial you pay a higher rate, shorter-term loan, amortized over 20-25 years, with a balloon payment due at 5,7,or 10 years likely. I'd look for community banks or credit unions locally for that type of property.
Yes, it would be considered commercial if a multifamily has 5 or more units. Residential loans for 1-4 units. Commercial you pay a higher rate, shorter-term loan, amortized over 20-25 years, with a balloon payment due at 5,7,or 10 years likely. I'd look for community banks or credit unions locally for that type of property.
@Anthu Tam make sure you have an experienced broker or commercial investor walk with you through the process. Your underwriting and value add is different between residential and commercial. I’m a commercial agent and happy to answer a question. Just send a pm.
As mentioned in previous responses a property is considered commercial when there are 5+ units. Depending on the purchase price, there are a variety of options available for multifamily investments. An investor can obtain a short term (Bridge loan) if the property has a value add component, then refinance into a perm loan once value add is completed. There are also non-recourse options available. When underwriting multifamily properties lenders will value cash flow and property value first to determine whether the property can sustain the loan, then we will look at FICO, liquidity, and experience of the investor to determine rate and terms. I hope this information helps.