Why do you need a loan ? You got 100 grand and your in philly . You have plenty of options to buy something with cash . Are you trying to be in b class neighborhoods ?
How big of a multi family property are you looking to get into? If you’re looking at 5+ units, you’ll need to get a commercial loan. Little bit higher interest rates and amortized over 15-25 years or so. From what I’ve heard (I haven’t purchased commercial yet) the lenders look more at the property than your actual credit score. I would think 700 is fine despite the short time period.
I would pick a few lenders and just ask them what info they can share about their commercial loans. Tell them your intentions and they should be able to give you round about numbers. From there you can window shop who your likely lender will be. Once you have it under contract, you can finalize your financing. It’ll actually be written in the contract as to what type of financing and at what interest rate your going to get, which is why it’s nice to have talked to some lenders beforehand.
As far as how much you can afford, it’s going to come down to what your down payment is. If you have 100k to put down, and the lender on a commercial loan will want to see 25-30% down, you’ll likely be able to purchase something in the 400k range. If it’s a residential property, they’ll want to see about 20% on average so you’d be looking for a (at most) 500k 2-4 unit building.
I was looking for months in NE philly and it was frustrating. Everything was overpriced and people were buying up properties that wouldn’t cash flow unless you bought all cash (but at that point your return is like 2%). So I know NE Philly is tough right now.
Some of the most important things to ask the seller are to provide you with income statements/ profit and loss statements. You need to know what the property is producing and how much it costs to do it. The bank (if commercial) will especially be interested in this because this determines how much risk there is in the property. Once under contract, you can get estoppel agreements from each of the tenants to make sure that what the seller is telling you is true. Always ask them why they are selling.
I’m about 30 min from Philly up in Bristol Borough where I’m DIY’ing a duplex I bought in December. Should be wrapping that up in the second half of this year. After that I’m looking to buy bigger multifamily 5-15 units. I’m starting to look for investors. Keep in touch if your still looking by the end of the year and/or if you want to go bigger than what you could do on your own.
You could always buy in cash. I would recommend staying in Philly, there are a lot of areas where it is not difficult to find a good deal on a duplex or triplex. I invest myself in the Frankford/West Kensington area, let me know if you have any questions.
Contact a commercial mtg broker or a local or regional banker. They will answer your question and guide you. They have an interest in developing a potential long business relationship. Look in your backyard first to know the market before jumping out into other states.
FL is a big state depends on where you're looking. Houston is short on supply and high on demand.
If you can't get a loan, find potential partners and bring something of value to them.
Hope this helps.
@Shimmy Yose , PM me and I can introduce you to some commercial lenders in the area.
Also, if you want to go bigger, we have a 284 unit deal closing in Houston soon and can share what that looks like compared to smaller properties in the area.
I started with the smaller properties too, but wish I had switched to larger properties sooner.
@Shimmy Yose You will be looking at different loan structures depending on what size multifamily you decide to buy. Anything that is 1-4 units will be considered residential, and 5+ commercial. I would recommend you meet in person with a personal financial adviser or mortgage broker that can explain how each is structured and what works best for you.
If you're interested in large multifamily, I think a great strategy would be to invest as a Limited Partner with an experienced group that will mentor you through the process.