Apartment building down payments

[Mike Harris]

What’s the lowest down payments can you make on a 6 unit apartment building? Either way owner occupied or just an investment property?

[Michael Ealy]

Originally posted by @Mike Harris:

@Erik Whiting, @ cool thank for the info. Yea I kno with units 4 and under u can get a FHA. So basically you'll need that 20% down, damn. I can't think of anyway to raise that $260k cause that's how much is 20% down in Brooklyn, NY

 Mike, nice name :)

There are several ways you can lower the cash you need to close the deal and here are just 3 of the ways I've used through the years:

1. You can just ask the seller to give you a buyer's credit at closing. For example, on a 41-unit we recently sold for $2.1M, we gave our buyer a $100,000 buyer's credit. What that means is the cash he needed was reduced by $100,000. Assuming he put down 25% of $2.1M - he was supposed to bring $525,000 cash to closing BUT, because of the $100,000 credit, he needed to bring only $425,000.

2. You can order a professional Property Inspection Report and in that report, the inspector will give you a list of deferred maintenance items over 12 months, 3 years and 5 years, etc. You can negotiate with the seller and ask to give you a deferred maintenance credit. Depending on the age and condition of the building you're buying, that can be substantial. So let's say you get another $100,000 deferred maintenance credit, which reduces your downpayment down to $325,000 - which is now only 15% of the purchase price.

3. Also, depending on the day of the month you close the deal, you will be credited a pro-rata portion of the rent, the security deposit and, depending on when in the year you close, you will also get prorated property taxes. Let's say all those credits amount to another $100,000 - so your final cash you need to close is down to $225,000 which is only 10.7% of the purchase price.

Hope this helps.