Triplex Investment Property Financing

11 Replies

I have a triplex under contract and have received the following finance option from my local bank. I have a longtime relationship with them and my credit is excellent. I’m going to pay cash initially because the triplex closing will happen prior to the loan being ready for closing.

Price for triplex $ 220,000

Loan Amount - (70% Loan to Value)

Rate – 4.66%

Term – Amortize 15 year period with a 10 year term. Repayment will consist of monthly Principal and Interest payments based on a 15 year amortization, however, will mature in 10 years. At that time we can renew/restructure/payoff

I was hoping for 20% down and 15, or better, 30 year term

Feedback...

Originally posted by @Eric Dame :

I have a triplex under contract and have received the following finance option from my local bank. I have a longtime relationship with them and my credit is excellent. I’m going to pay cash initially because the triplex closing will happen prior to the loan being ready for closing.

Price for triplex $ 220,000

Loan Amount - (70% Loan to Value)

Rate – 4.66%

Term – Amortize 15 year period with a 10 year term. Repayment will consist of monthly Principal and Interest payments based on a 15 year amortization, however, will mature in 10 years. At that time we can renew/restructure/payoff

I was hoping for 20% down and 15, or better, 30 year term

Feedback...

Sounds reasonable. Will they be looking at any DSCR and have they taken that into account? Make you sure you know how they work that so it won't be problematic and mess up the loan. 15 year amortization can sometimes throw that off a bit.

@Eric Dame

How soon are you supposed to close? Is this an investment or a primary? 

I would just be hesitant that you will have to refinance in the future if you don’t pay off at the 10 year mark. 

If you go the route of conventional with a purchase of an investment property you will get an LTV of 75%.

Are there any improvements you can do to force appreciation and make it worth doing a cash out versus an initial purchase? 

@ Caleb Jordan

The bank is not looking at DSCR. 15 year amortization does yield a smaller DSCR than I want. I am really looking for passive income from real estate investments. This is my first investment property purchase but plan on many more. Should I search for more of a commercial lender? Are they more likely to provide a longer loan term?

@Jerry Padilla Closing date is set for July 1, and it is an investment property. There are improvements I can do and the rents are currently below market. What do you think about a cash purchase, doing some improvements and increasing rents to market, then refinancing with a commercial lender?

@Eric Dame , I like the strategy of buying cash and then using delayed financing. It puts you in a very strong position.

I don't think the terms from your bank are all that hot, honestly. The rate's pretty good, but that's it. I'd shop around, especially to credit unions, and see if you can do better. The existing relationship is important. Perhaps they will match a better offer.

@Eric Dame

Yes, probably too close to closing date to try and close with purchase financing. If you pay cash, you can cash out with delayed financing prior to 6 months with conventional - which is where you will see the lowest rates.

Yes, doing some improvements to increase the value and rents will help you get more money back out when you cash out refinance. Since you haven’t closed on the purchase yet, Here is a tip;

If you include on your closing statements (which vary state to state - HUD-1/ALTA statement ) the renovation costs - and have them charged at closing...... This renovation cost now becomes an "initial closing cost" and can be included with the max that you are able to pull out prior to 6 months. With delayed financing you are limited to pulling out a maximum of your initial investment.

For a triplex it will be 70% LTV that you get back when you cash out.

Originally posted by @Eric Dame :

I have a triplex under contract and have received the following finance option from my local bank. I have a longtime relationship with them and my credit is excellent. I’m going to pay cash initially because the triplex closing will happen prior to the loan being ready for closing.

Price for triplex $ 220,000

Loan Amount - (70% Loan to Value)

Rate – 4.66%

Term – Amortize 15 year period with a 10 year term. Repayment will consist of monthly Principal and Interest payments based on a 15 year amortization, however, will mature in 10 years. At that time we can renew/restructure/payoff

I was hoping for 20% down and 15, or better, 30 year term

Feedback...

 If you did a portfolio loan with a 30 year fixed at a rate of 7%, no income verification at 75% ltv, your monthly p and i payment would be 1025.  Your current p and i payment will be 1191 for a 15 year amortization and a 10 year balloon.  Your current loan amount would be 154,000 and with the 30 year at 75%, you would be borrowing 165,000.

I would definitely talk with @Jerry Padilla and see what he can do through Freddie/Fannie for a 30 year fixed. He definitely know his stuff. He helped me get what I needed on financing a Quadplex I recently built with a local bank through a construction loan, and I am closing on Tuesday into permanent financing! They wanted 75% LTV and I have a 30 yr fixed rate at 4.875%.

@Eric Dame , you said in your above post you are looking to real estate for passive income! So well said and we all are! But what better way to have passive income, then along with a good fixed rate! Plus your DSCR and cash flow would look so much better on a 30 yr fixed. This extra cash flow could help with your DTI on future deals, rather then hurt you with not enough 🙁.

If your credit is above a 720 or 740 and you have 25% down, you should talk further with @Jerry Padilla and see if he can get you locked in for 30 years.  You may need to buy the rate down for a point but having it locked, and especially not having an interest rate crystal ball, hahaha, I would definitely go with the safer more cash flow scenario!