Buying a Multi-Family

7 Replies

Hey BP, Trying to get more active on here and get some good information. Here's the situation. My Wife and I bought a duplex over a year ago in North Carolina and we're now looking to make our next move. We currently live in one side of the duplex. The duplex was a foreclosure and we put 15% down because we decided to live in one side of it. Our Morgtage Broker is telling us that we wouldn't be able to move into another duplex because he couldn't "justify it to Fannie Mae". He says that we need to make it look like we're "moving up" on our next primary residence. Is that accurate information? We have an LLC for our business and would rather purchase properties with our business but Ive also been "told" that we would use our personal credit anyway. Is that true? I've also heard from a Morgtage Broker that it's 25% down on multi-family investment property. Is that correct? Could we get a commercial loan? How complicated is the commercial loan process? How would you recommend we buy another Duplex? All input would be appreciated! Thanks

@Chris Nelson - You should be able to get to another duplex as your primary. Check with another mortgage broker. You'll find it very difficult to get a loan for your LLC from most lenders. Dig around on here about LLC loans and you'll find a ton of threads about it. Commercial loans are not the best way to go if you don't need to. Their terms are not nearly as friendly and should only be used if needed. You should be able to take advantage of residential lending since it will be your primary again. Are you actually using a mortgage broker or a loan officer?

Medium rhplogo jpgDan Mackin, Red Hawk Properties | [email protected] | 720‑971‑7139 | http://www.redhawkteam.com/

We experienced something similar as to having to 'move up' when buying the next property.  Fortunately, each property was larger to accommodate our growing family (so we had good justification).  I don't know if it's a solid rule but every lender told us the same thing.  I suppose the system is designed for folks who buy and live in these properties for several years rather than (to be) investors.

Keep in mind that the lender doesn't want the loan to be rejected by the underwriters so they tell you ahead of time what the terms are.

Originally posted by @Dan Mackin :

@Chris Nelson- You should be able to get to another duplex as your primary. Check with another mortgage broker. You'll find it very difficult to get a loan for your LLC from most lenders. Dig around on here about LLC loans and you'll find a ton of threads about it. Commercial loans are not the best way to go if you don't need to. Their terms are not nearly as friendly and should only be used if needed. You should be able to take advantage of residential lending since it will be your primary again. Are you actually using a mortgage broker or a loan officer?

 Thanks for the timely response!  We're using a "Mortgage Banker", not sure what to really call that.  Here is the link to who we are using.  http://www.kenbuckery.com/Default.aspx  I agree, we should probably shop around for someone else.  Is a Mortgage Broker better to use than a Loan Officer?  Whats the difference?

Originally posted by @JOHN DE SOUZA :

We experienced something similar as to having to 'move up' when buying the next property.  Fortunately, each property was larger to accommodate our growing family (so we had good justification).  I don't know if it's a solid rule but every lender told us the same thing.  I suppose the system is designed for folks who buy and live in these properties for several years rather than (to be) investors.

Keep in mind that the lender doesn't want the loan to be rejected by the underwriters so they tell you ahead of time what the terms are.

 Thanks for the timely response John!  I grew up in Mansfield, Tx!  Small world.  

Did you use a Loan Officer or a Mortgage Broker when you encountered the "move up" response.  

A mortgage broker is more of an independent type who has multiple lenders they work with which can result in more options and flexibility. A loan officer is just at a particular institution such as a bank or credit union.

Medium rhplogo jpgDan Mackin, Red Hawk Properties | [email protected] | 720‑971‑7139 | http://www.redhawkteam.com/

@Chris Nelson

Hi Chris- that's awesome that you grew up in Mansfield!  We have a few properties (SF) there.  It's been growing steadily.  I'm sure North Carolina is beautiful!  We visited Ashville a few years ago.

We used the same lender (loan officer not a mortgage broker).  She is competent.  I don't recommend her for investments though.  What I am doing now is researching for investment type lenders since it is challenging to come up with 25% down for each property.

She helped me understand that if the underwriters feel that you are buying these properties as investments they will simply reject the loan.  You could just 'move up'.. buy something larger for future growing family or simply a nicer unit.  It should 'look' like the next purchase is where you both plan on living for the next 5 years (not specifically 5 years but not planning on moving soon).

Commercial loans are much easier, but depending on the lender, a duplex may not be considered a commercial loan. I used a commercial loan when buying three SFRs as a package deal from another landlord. Other than a little better interest rate, there is no reason to worry about which one is your primary residence. Just stay where you are, continue to live inexpensively, and buy another cash flowing property as an investment. No need to mis-lead your bank.