Any ways to get a fixed interest rate on mortgage on 5+ units?

Question

Im not personally comfortable with variable loans, which is why I stick to the 3-4 unit properties. However, with 3-4 units getting rarer in the area I buy, and 2 units being too cheap and not worth me using a mortgage ( in the terms that it adds to how many I can have without creative financing), are there any other solutions to buying properties over 4 units that are fixed loans and not variable after x amount of years? The other option for me is buying cash and refinancing out with a fixed interest loan if they allow that on 5+ units. All the help is appreciated !

Sam Grooms · Answer

I'm willing to bet at least half of these credit unions in your neighborhood (most likely all) have fixed rate commercial real estate loans:

https://njfcu.org/business-accounts/commercial-len...

https://www.greateralliance.org/business-loans/

https://www.affinityfcu.com/business/business-loan...

https://www.visionsfcu.org/businessloans

Sam Grooms · Answer

Of course. Fixed rates are just as popular as variable rates for commercial loans. I'm sure you have a local lender that will provide 80% LTV fixed rate debt. It'll likely be recourse debt.

Theo Hicks · Answer

I would reach out to a mortgage broker and ask them what options are available to you based on your personal situation, because it varies from borrower-to-borrower. Or work with a smaller local bank.

Stephanie P. · Answer

New Jersey is a weird state that doesn't allow prepays, so you're going to find the fixed rate commercial loans may be prohibitively high.

That said, they're out there. You need a good mortgage broker.

Stephanie

Kevin Dougherty · Answer

Like Sam Grooms stated, the smaller community banks/credit unions are your best chance for a long term fixed rate. They are usually known as portfolio lenders, meaning they like to keep the loan in house and not sell it off to the secondary investment markets. You can google banks near your zip code and start calling all of the local banks, speak to their loan officers and ask them directly if they can do that for you.

Stephanie P. · Answer

One of the things US Commercial brings to the table is knowledge.  When our guys sit down and talk to clients about their situation, part of what they're doing is extracting information in an effort to expeditiously move their loan along.  We don't want to waste their time (or money given each lender requires the appraisal to be done through their specific AMC) or ours.  One way to explain it that everyone seems to get is this; we look at loans like they're Plinko on The Price is Right.  We drop the raw loan into the top of the Plinko board (the beginning of the information extraction) and after the loan hits a bunch of pegs like short seasoning or must be 25+ years fixed or ARM is okay, but keep the points low or crime statistics of the property's neighborhood or even the experience of the borrower and the loan finally gets to the bottom, we know where to send it.  It takes a lot of time and experience to know which lender will do what and neither are free.

So to answer your question, yes I can name some lenders that will originate fixed rate loans for 5+ units with that criteria, but I will respectfully decline to do so.  Hope you understand.

Stephanie

Todd Dexheimer · Answer

Can you name some lenders that will do a 25+ year fixed loan for a 5+ unit property other than HUD?

Stephanie P. · Answer

The loans we're talking about aren't Fannie/Freddie loans.  They carry a higher interest rate because they are portfolio loans, but believe me, they're out there.

Steve Vaughan · Answer

What's bothered me more about commercial loans than the rate being adjustable is the calls and making me report my financials to them every year.

You'll submit your tax returns and PFS annually.  When the call comes (usually every 5 yrs) the loan review committee will use them to determine whether to renew your loan another 5 or not.  Or they could just determine they no longer have an appetite for that loan or asset type anymore and just call it due and payable.

If you do find a fixed rate, it will probably be high. Or they'll say sure, we'll take the rate risk, but the loan will expire in 5 yrs. That's what US Bank does.  You have to refi every 5.

I couldn't wait to get rid of my 3 commercial loans.  Any future commercial acquisitions for me will be owner financed or $1M+ Freddie products.

Todd Dexheimer · Answer

I would counter what is said above on being able to get fixed rate loans. I haven't found a local bank in the 4 states that I do business in that offer long term fixed rate. They will give you a loan that is 25 year amortization fixed for 5 years, maybe up to 10. If you buy the property right, don't over-leverage and are well funded, then these loans should not be a problem. In 5-10 years, interest rates may be way up, but you will have paid a good deal of the principal balance off.

The only long term fixed rate product that I know of is a HUD loan, where you can get 35 year+ fixed rate loans on 5+ units. The loan amount will have to be above $1mm.

I the same category is the Fannie Mae/Freddie Mac loans. These can be fixed for 10-12 year and amortized for 30 years.

Any ways to get a fixed interest rate on mortgage on 5+ units?

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