Texas Multi Family-Loan Question

6 Replies

I am considering the purchase of a 10 unit multifamily property in Texas for $375K.  The property consists of 5 duplexes.

My credit is fine and I have 20% to put down on the property. 

However, I have spoken to 2 lenders and am being told that I can only obtain a 15 year loan.  The reason for the 15 year term (or so I was told) was due to the type of loan (commercial). 

Have any of you obtained a commercial loan for over 15 years or is 15 years the industry standard?

Jason

Pretty standard. Can go longer with agency debt.  

I am assuming that you mean fully amortizing over 15 years. There are many lenders that will do longer amortization but getting past 15 call will be tough.

only longer commercial loan I heard of are Fannie and Freddy loans. The will go up to 30 years but they have strict qualification rules for the buyer and the property. 

Freddie and Fannie also have loan amount minimums, but even they prefer to stay in the 5, 7, 10, or 20 year hybrid, term with a 30 year amortization. Only HUD offers a fully amortizing 35 year term.

As stated, it's very rare to get a loan that is longer than 15 years, from any lender, and you've done well to get that much.

Generally, the longer the term of the loan the higher the rate since the lender is going to build in a buffer to compensate for market fluctuations. 15 years is a long time in the commercial space.

Grated, a higher rate isn't going to have a dramatic impact on a small loan so the upside to you knowing that you have a long-term fixed rate may be worth it. The second component that affects the payment is the amortization. Are you getting a 25 or 30 year amortization or is this a 15/15? 

Lastly, you stated you have 20% to put down. You want to make sure you can actually obtain 80% LTV as that's high with most lenders actually lending in the 70-75% range. An 80% LTV, long-term, loan isn't something most banks would be fine with. Too much risk.

Most of the commercial loans I have gotten over the last 15 yrs. have been 15-20 year amortizations with a 5 year balloon. However my bank has always been willing to renew the loan at the end of the 5 years. Now, we all know that the gamble is that they "always will" renew & many have been caught with their 5 years ending in a bad lending year putting you at risk of the balloon payment coming due with the bank taking a pass on renewing. Also most of these loans have had a "prime plus X% adjustable rate". These deals in my area may have been because of the volatile economy of the oil industry. Recently I made a deal with another bank for a commercial loan at 1% over prime locked in for 5 years.

There are lenders doing 20-30 yrs term but you'll need more than 20% DP. Lots of what you'll run into are 5, 10, 15 term amortized over 25-30 yrs like the other posts say. Also at that price point I can't say that agency is where you want to go or even be able to.

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