30 year am for 1-4 and/or 5+ units in Kentucky?

Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes

Does any bank here do this? I’ve sat down with half a dozen+ smaller banks in Louisville and not one has indicated that they could do a 30 year am in any capacity if the property was anything other than a single family home. I’m scratching my head and open to any recommendations.

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Brian Garrett

Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes

1-4 units falls under regular conventional Fannie/Freddie so 30 year amortization is standard.

You shouldn't be having a problem getting this loan unless you don't qualify for conventional financing.

5+ unit goes through commercial/portfolio lenders and most are 20-25 year amortization but 30 does exist.

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Brian Garrett
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
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1-4 units falls under regular conventional Fannie/Freddie so 30 year amortization is standard.
You shouldn't be having a problem getting this loan unless you don't qualify for conventional financing.
5+ unit goes through commercial/portfolio lenders and most are 20-25 year amortization but 30 does exist.
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Kyle Schlosser
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Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
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@Brian Garrett I was simply having initial, in person conversations with the banks...while I have no doubts about being bankable, we didn’t even get to the point of running actual numbers, credit, etc. I was constantly finding 20 year am, one had a “maybe” answer to 25 years.
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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
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@Kyle Schlosser if you are referring to 5+ units, you are correct. However, four units or less should have no problem qualifying for a conventional loan. If you bring them a specific deal maybe it would be easier for them to figure out how to help you.
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Ray Johnson
Irvine, CA · Member since 2016 · 545 posts · 614 votes
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@Kyle Schlosser Can you clarify the type of asset you're discussing with the bank? This will help other provide a better referral source, Is this for 1-4 units or 5 or more units?
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Kyle Schlosser
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Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
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@Ray Johnson @Brian Garrett @Nathan G. This would be for a non-owner-occupied buy and hold. As I gear up to begin, I wanted to try and get my financial ducks in a row (as much as I could) prior to seeing properties. I’m not sure if the chicken or the egg is supposed to come first, if you will.
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Stephanie P.Pro Member
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
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Originally posted by @Kyle Schlosser:
Does any bank here do this? I’ve sat down with half a dozen+ smaller banks in Louisville and not one has indicated that they could do a 30 year am in any capacity if the property was anything other than a single family home. I’m scratching my head and open to any recommendations.
Kyle
30 year amortization is widely available whether you go with a bank, non-bank or if for some reason, you don't qualify for either, portfolio lending. There are pieces to the puzzle missing that are eluding all of us that are on this thread. To be clear, there is no restriction to less than 30 year amortization on conventional financing.
Stephanie
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Kyle Schlosser
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Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
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@Stephanie Potter And that’s why I’m scratching my head. It’s like the smaller, community banks that I’ve gone into have no appetite for non-owner-occupied status properties or something. I expected the process to be about finding a bank I liked as opposed to finding one who even offers what I considered to be “standard” financing terms. I realize it’s not for a primary residence...but that’s what the concept of investing is... How could I be phrasing what I’m looking for in a way that’s so wrong it’s giving me these undesired results?
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Kyle Schlosser
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Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
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And for clarity, the banks have all been smaller, more community-type establishments, the majority of which are keeping their loans in-house. One offered 65% LTV, Max 20 year am and made no delineation between 1-4 or 5+ units, essentially the opposite of what I would logically expect...it was all the same to them as they were “investments” as opposed to primary residences.
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Jeff Ronningen
Investor · Cincinnati, OH · Member since 2015 · 242 posts · 182 votes
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@Kyle Schlosser You didn’t provide some key information. If you’re talking 4 unit or less properties you can get 30 year am. If you want to buy as an LLC as opposed to buy individually that could be the problem. I may have missed this, how many rental units do you own currently? If you own too many (more than 4 or more than 10 depending on lender and the programs offered) that could be the problem. It comes down to whether you can get conventional financing or not. If not you have to go commercial in which case 30 year is hard to find. If you want to message me personally I can refer you to lenders in Cincinnati who can probably work with Louisville properties. Sounds like the people you’ve talked to aren’t helpful.
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Bryan Reese
Investor · Florence, KY · Member since 2016 · 11 posts · 2 votes
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I've found there are times when banks are reluctant to finance a particular asset class, because they already have what they consider enough exposure to that area. I don't know if that's the case for you, but it's a potential puzzle piece for you. Best wishes.
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Kyle Schlosser
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Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
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@Jeff Ronningen Thanks for mentioning that. I have zero properties at this point...and that could theoretically be a serious factor, though I didn’t expect it to be. I expected this to be an easy process of matching personalities & alignment with goals. It would be (more than likely) 2-4 unit properties as I’m just starting out. This isn’t at all a case of non-approval, it’s the banks (so it seems) lumping non-owner-occupied 1-4 units into a full-blown commercial category. I will happily, and I’ve indicated this in my lender meetings, create a business entity if required.
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John Warren
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
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@Kyle Schlosser what you are running into is the same issue a lot of folks run into when they are starting out. They want to buy small multifamily in their LLC which has no credit, no track record, etc. They also want 30 year fixed financing. As others have said, it is fairly simple to get 30 year fixed financing on investment properties from 1-4 units, but you have to buy in your personal name.
I can tell you that i just got a 30 year amortization/5 year term loan package on a 19 unit deal in Berwyn, IL. This is not that uncommon, and we were offered this loan package from two different banks. A big issue might be your deal size. Local banks do not like to do "tweener" deals that are 200k, etc. If you start getting closer to 1 million in debt, the banks will get more excited and will give you better loan terms. It is more economical and profitable for them to have a larger loan as opposed to a bunch of smaller loans.
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Kyle Schlosser
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Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
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@John Warren Very interesting. I appreciate the feedback. I’m absolutely open to either structure, use of an LLC/other entity or straight through as a personal loan. I’m going to keep searching and modify my approach a bit to be as sure as I can that I’m properly conveying my intentions and also asking for the right type of loan product. Thank you!
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Samuel Yee
Specialist · Houston, TX · Member since 2018 · 3 posts · 2 votes
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@Kyle Schlosser Freddie Mac and Fannie Mae through their respective SBL (Small Balance Loan) and SML (Small Multifamily Loan) programs can offer nationwide non-recourse financing utilizing 30 year Amortization. However, they will need ownership with previous MF experience so they won't finance you if this is your first property.
If you're a first timer, you can get around this by bringing in another key principal with the experience.
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Kyle Schlosser
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Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
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@Samuel Yee Thank you for the information. Both good (and not so good) to hear. How much previous ownership is required—just one?
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Samuel Yee
Specialist · Houston, TX · Member since 2018 · 3 posts · 2 votes
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@Kyle Schlosser Typically they would like to see two years experience. This is a hard rule for Fannie but Freddie Mac is a bit more flexible. They could grant an exception if you are living locally and utilized 3rd party management. It also depends what your overall CRE or rental background experience.
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Kyle Schlosser
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Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
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@Samuel Yee While I’m of the belief that managing my own (to get started) would be a great learning experience, I wouldn’t be too sad to see it professionally managed...especially if it’s something that makes the bank happy as well and can get the ball rolling.
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John Warren
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
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@Kyle Schlosser I am not 100% sure what the local bank requires. I have owned my 4 unit since 2015, so I have the management component already. One way to jump that hurdle might be to partner with an experienced operator in your area. A lot of times if you bring the capital and balance sheet, you might be able to find an operator who is lacking in one or both of those departments.
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Priya ThomasPro Member
Investor · Cincinnati, OH · Member since 2017 · 135 posts · 61 votes
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seems like you have been talking to the wrong side of the lending . Talk to residential loan officers, not the commercial ones. Almost all the banks (except smaller credit unions) offer 30 year AM, fixed (upto 4, conventional upto 10 loans). Your best bet might be US Bank, their rates are competitive or you can find local lenders too. Again, talk to residential loan officers, not commercial.
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Ed Matson
Investor · Stratford, CT · Member since 2015 · 258 posts · 230 votes
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@Samuel Yee is absolutely correct re: Fannie/Freddie SBL loans. We just did a refi via this route and got 15 years fixed with a 30 year am. However, we had owned/operated the property for 15 years so we were judged to be a good risk. We worked with an excellent commercial loan broker. I suggest you seek same in your area. Well worth the cost.
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Kyle Schlosser
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Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
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@Priya Thomas Great advice. I really appreciate it. I will. Thank you.
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Kyle Schlosser
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Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
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So I went back to one of the 20 year am banks via email and simply asked the following: “Under what scenarios do you offer 30 year am products for investment real estate...even if just a 2-4 unit property?” The tune changed entirely. He said they offer 30 year am products and said he would have to pull in his mortgage partner on it. I’ll again reconfirm that this applies to non-owner-occupied property and report back.!I’m a bit shocked that this didn’t come out earlier when I asked, face to face, if they had any 30 year products, but progress nonetheless.
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Kyle Schlosser
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Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
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Applies to non-owner occupied properties. Thank you to all for the feedback!
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Michael Seeker
Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes
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@Kyle Schlosser - despite all of the replies on here it doesn't look like you've got clear direction yet. There are two types of lenders for your scenario, residential and commercial. The two are very different and depending on who you talk to you'll get widely different answers.
Residential
-Can do 1-4 unit loans with 30 year amortization
-Property must be held in your name, not an entity
-Underwriting will be to Fannie/Freddie guidelines which means rents will be heavily discounted or excluded for purposes of calculating your DTI ratio
-Pretty much any bank will have somebody that can do this and there are infinite resources online.
-In my experience, most people doing these types of loans are relatively new to banking/lending and may know less about the loans they're working than a trained monkey. Verify anything that doesn't sound right to you.
-Underwriting guidelines are published and available for review - this Fannie grid should have any info you need regarding what requirements are and what type of loan structure you can get based on your personal factors.
Commercial
-Can do any number of units, typically 20 year amortization with 5 year term and 75-80% LTV
-They prefer you hold property in an entity
-Rates are generally 25-100+ basis points higher than residential loans
-Underwriting is in house, much more flexible with loans than residential
-People doing these loans typically have a long track record in the industry and are very knowledgeable about the products they're offering
It sounds like you spoke with commercial lenders at these small banks, and they assumed you wanted a commercial loan. If you want a residential loan, you're probably better off going with a big bank with regards to terms and rates.
Hope this helps!
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Kyle Schlosser
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Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
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@Michael Seeker That was extremely clear and it seems your assessment was spot on. I believe I was consistently getting commercial people despite being clear about my newness, number of units desired, etc. I’m. Now being more diligent about it as I speak with lenders and even attempting to re-clarify when they say “commercial.” Thank you for the great details. Are you Louisville or Memphis based?
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