Commercial Multi Family Purchase

7 Replies

I have come across a 13 unit bundle of 3 properties that I would like to purchase. I don't know much about commercial loans/buying process and how it differs from conventional, hoping someone could help me out. Are the loans shorter , i.e. I'm not going to get a 30 year loan, what is the standard loan term? What are the banks looking for when it comes to approval, my income/debt ratios? I would need to partner with someone to afford the down payment, I know this is usually done with an LLC, are commercial loans given to LLC's? I have been denied by several banks trying to purchase a 2-4 unit with an LLC. Any advice is greatly appreciated.

Originally posted by @Greg Snell :

I have come across a 13 unit bundle of 3 properties that I would like to purchase. I don't know much about commercial loans/buying process and how it differs from conventional, hoping someone could help me out. Are the loans shorter , i.e. I'm not going to get a 30 year loan, what is the standard loan term? What are the banks looking for when it comes to approval, my income/debt ratios? I would need to partner with someone to afford the down payment, I know this is usually done with an LLC, are commercial loans given to LLC's? I have been denied by several banks trying to purchase a 2-4 unit with an LLC. Any advice is greatly appreciated.



Every bank is different. They have different requirements, rates and terms. Small commercial loans like this will be based on your financials, credit history and experience as well as the property itself. You will need 29-30% for down payment and 6-12 months reserves in the bank as well. Best thing is to put together a complete detailed package and shop every bank and credit union in your area. You can also talk to commercial loan brokers as well. 

 

Hey Greg, 

Commercial loans typically reset every 5 years with a 25 year amortization. Which means your only locked for 5 years but the monthly payment is the amount as if the loan was 25 years. I would approach your local banks not a national one for commercial loans. I believe they will need it in an LLC to loan, either way you want the LLC for a property like this. It protects you in many ways. Approvals are similar to your standard debt/income and credit but they will also take the property's income vs expenses into account. Once you get one commercial deal under your belt the bank will get to know you better and the next one will be easier. Try and talk the bank and the seller to go 80% bank loan 10% seller loan and 10% out of pocket. Good luck!

Hey @Greg Snell there are lenders that can do a 30 yr fixed on a 5-9 unit (potentially 10-12) and since this is 3 properties (separate tax IDs/parcel numbers I'm assuming), then this would qualify -- could do it as a cross-loan or single loan against a single property. It'll be based on your experience, credit score, and the property's cash-flow. Whether or not you qualify also depends on the purchase price, location/market, your liquidity and the source of your down payment. 

You may also be eligible for a bridge (12-36 month) interest-only loan option.

@Greg Snell

I know you have probably received much advise on this topic, and I am sorry I just sow it I would have commented earlier. Yes, commercial lenders lend to LLC's they prefer to as this is a business loan and when you seek to purchase residential property in the personal name most banks will not do that. I have a couple of questions about your purchase if you don't mind. First, will the properties need to be renovated? Secondly, what are your objectives with the properties? Are you looking to flip them or hold them or what?

Financing is different depending on your goals. Commercial lenders do lend on portfolio's, they lend bridge or short term money, they lend long term, they do rehab as well. I can comment on types of loans available when you tell me what you are looking to do.