Commercial Loan vs Residential Loan on a Packaged Deal

[Weina Shi]

I am under contract to purchase 7-units multifamily (3-unit + 4-unit on parcels next to each other). I can either do one commercial loan at 4.5%, 5 year fixed rate, the typical penalty 54321 or two residential loans at 4.375% (or lower) for 30-year fixed with no prepay penalty. I would like to start building a real estate portfolio and have that portfolio grow. If I take the two residential loan, would it affect my ability to borrow on the next commercial loan (which is based on property on my net worth)?

Would the lender allow me to put both properties under the same LLC? One attorney recommends realty trust rather than LLC. Which one is better?

[Upen Patel]

@Weina Shi 30 yr fixed is always better. And you can only get those on a residential property. So I would highly recommend going with a 30 yr fixed. As far as I am concerned the type of financing you have doesn't impact the type of financing you can get.

The rate you quoted looks like an owner occupied rate. Are you going to owner occupy? Make sure the broker is not BSing and then change on you later. For a Multi investment purchase you will need to put 25% down.

Lastly, if you want to put the property in LLC, then be sure that you get a residential portfolio loan. You can't get a LLC title with Fannie/Freddie loan. The rate will be higher with this, but you are sill better of getting a 30 yr fixed as it provides you protection against market movement.