New to multifamilies

20 Replies


So far we have 4 sfr in 3 different states. I'm looking at an 8 unit apartment complex. Is it considered commercial financing?  And is that typically 30% down?  I already have 4 conventional loans, so I'm not even sure I could get financing?


I don't believe you can get a residential loan on that.  I believe anything 5 units and above is considered commercial for those purposes.  There are many ways to get financing outside a traditional single bank loan.  It's the most common, but not your only option.

Unlike SFR's, you should be able to get financing based on the solidity of the deal. As far as how much you'll have to pay down, it all depends on the bank.

@Amber Stevens

 You are definitely going to be looking at commercial loans with a higher rate than you are seeing for single family rentals.  I would try local community banks either in your hometown or nearby the property.

Depends on the configuration. We purchased an 8-plex that consists of 4 duplex buildings on 2 separate tax lots. We were able to do it with two conventional loans, because it was 4 units per tax lot. They share a parking area and coin-op laundry, and water is on one meter, so it functions as an 8-plex.

Five units and above on any one tax lot will be commercial. Talk to some mortgage brokers and also local credit unions about your financing, and/or explore some of the more creative options other investors talk about on BP. Good luck!

@Amber Stevens you sound very comfortable in your career. What made you go with rental properties outside of your state?

@Marcia Maynard I am interested in multi-family properties. Right now I'm researching what all I need to do in preparation. One thing that's new to me is the water meter thing. Is it best to have only one meter? For a first timer what would you say I need to key in on?

Congratulations to the both of you, as well as everyone on this feed on the success in your ventures!

@Amber Koontz

In multiunit buildings it is preferred to have separately {sub}metered water for each unit.  Most municipalities / water utilities will install a single meter on the water line into the building - they do not care how much water individual units consume.  The builder/owner then installs a manifold with separate water lines to each unit and sub-meters each of those runs.   This allows the landlord to bill each tenant for their specific water consumption.

In smaller residential properties (2-4 units), especially those converted from an SFR, it is rare to have individual water runs to each unit and sub-metering is not possible without a great deal of effort and expense.

@Roy N. Thank you for the breakdown. Very good information. I am enjoying learning about these things. 

Originally posted by @Amber Koontz :

@Roy N. Thank you for the breakdown. Very good information. I am enjoying learning about these things. 

 I forgot to mention that older properties almost never have sub-metered water and likely are not plumbed with "home runs" from the mechanical room to each unit.   

We have one that has separate water runs to each floor, but each unit on a floor tees from the pipe running down the centre of the building ... this required the inconvenience of installing the sub-meters in each unit {fortunately they can be / are read remotely}.

We have purchased in multiple states for a few reasons. One in GA is because it was our home for 7 years before we moved. Now that we are in CA, it is a rental. We also have a home in my husband's hometown in central IL. It is an older property w great cash flow and we have family and friends that help us manage it. And now we have one investment here in CA. 

@Roy N. So for convenience maybe I should consider newer models. 

@Amber Stevens That sounds like a great turn of events. I only ask because I'm new and a bit intimidated by investing outside of my state. I'm sure that will change as I progress. 

Originally posted by @Jerry Padilla :

@Amber Stevens 

@Justin B.

Is correct. You need commercial financing for greater than 4 units. Four units or less you can go up to 10 properties and still get residential financing. The guidelines are more strict and require a 720 credit score.

Here is some more information.....

 Is the 10 property thing new?  My lender told me 4 was my max.  Thanks!

10 is the number that is allowed by fannie mae. If your lender told you 4 then that is an individual institution overlay. Many big name banks have these additional overlays on top of the fannie requirements. Smaller local banks and credit unions are where you want to look.

@Amber Stevens

@Amber Stevens

No it is not new. Most lenders will only go up to 4. There are only a few lenders that will go up to 10 with conventional financing. 

I just experienced this same situation.  Ask around to friends and local agents what banks (the one i went with is in a small small rural town) they suggest for commercial loans. Local small banks have much more flexibility when it comes to terms if they keep loans in house. If you prove to them you are a good investment over time they will loan to you time and time again (with great terms) with no problem.

@Jerry Padilla i hope you do not mind me tagging you. You are my go to guy, you have so much knowledge!  How many loans can someone have on properties? I know you can use them as equity, but is there a limit? A point where you must completely pay off a loan before moving on? (Buy and hold wise)

Originally posted by @Amber Koontz :

@Roy N. So for convenience maybe I should consider newer models. 


I would still look at older buildings, just add an examination of the plumbing for viability of sub-metering to your check list and factor your findings into any offer that may arise.

@Roy N.  Thank you for the information. Good luck to you on your five year goal! 

@Amber Koontz

Always tag me... I don't mind at all. Conventional lenders you can get up to ten mortgages. Some portfolio lenders will go higher. 

For a single property you can have several loans. Primary and Secondary mortgages, HELOC, Home Improvement loan - can all be taken out on an individual property.

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