Conventional loan VS applying for Commercial loan, expanding MF

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Hello. Hubby and I live in Cali, have few SFH rentals I want to 1031 (or maybe keep). WE want to transition to MF (maybe start with 4 plex or small commercial multi family, like 5 and up). We are accredited investors. Would like to get your input. We will do this out of state, possibly TX, TN. What would be a good strategy, start with a 4 plex or start getting commercial loan? Any recommendations for good lenders with competitive rates if we go conventional? Also, looking for commercial banks or lenders if we go for Com loans? Benefits of staying with conventional loan VS doing Commercial as I want to expand this MF business? Thanks so much in advance! Happy Monday.

Hi @Salome Ditmars !  The primary benefits of going commercial instead of conventional loan are that it doesn't hit your personal tax return (and related: it isn't underwritten off of your personal financials).  If, in the likely event, your personal financials will allow for a conventional loan and you're fine with the 25% down then it's going to give you a lower, and locked, rate over the life of the loan.

I would personally get conventional loans while the rates are historically low and while you have room for them (you'll be capped at a number, I believe being 10 per spouse if you are both earning).  After that you'll still have access to commercial loans, but your stable will be filled with fixed-rate loans giving you some appreciable stability.

Really when you are looking at commercial loans it seems to all the same below $1,000,0000 loan balance.  Below that mark you'll look at a 15-30 year amortization with a portion of that being fixed rate.   Above that loan balance you may have access to some government cheese loans (Freddie Mac Small Balance and the Fannie Mae equivalent, to name a couple).  That's where it really starts to get exciting.