Rental Property Investor · Brainerd, MN · Member since 2015 · 72 posts · 42 votes
I am looking to buy/finance my next rental property which happens to be a four plex.
I am just wondering what the advantages/ disadvantages are of each type of loan. The conventional loan is 25% down 4.375% for 30yrs fixed. The commercial loan would be 4.5% with 20% down and interest gets re done every 3-5 years.
I have always done conventional loans. But in the past have ended up paying off 4 of the 5 loans within 4 yrs by snowballing.
Commercial may have higher closing costs but may also be easier to qualify for and also typically a term less than 30 yrs. Balloons also common at the end unless you pay additional principal each month.
A 4-plex is not a commercial loan as it will be zone residential. 5-uits and more are considered commercial, but to answer your question the primary difference between the two loans is that a residential loan is based on your income to qualify for the loan where a commercial loan is based on the property's income.
what is your planned hold period?one of the advantages of a conventional loan is the ability to take out a 30 year fixed loan if you intend to be a long term holder.