How to buy a multifamily unit??

Question

Hi. My name is Michael. I'm new at BP. I found a property with 6 units. They asking for 760k. I only had 50k on cash. So I don't have enough money for the down payment. All 6 units are rented already. So I wonder if someone knows a method or strategy to buy this property. Thanks

Evan Polaski · Answer

@Michael Peiro, Arn offers a good suggestion, and there have been many on these forums that have had great success with seller financing.  These people seem to have the best luck when they talk to seller and get a sense of what their goals are.  If the seller is sick of managing, but likes the monthly cash flow and not needing the whole sale price now, it could be a great option.

My bigger concern is the ability to secure bank financing on your own.  No matter how much you might here that over 4 units, the bank will underwrite the property, which is partially true, they will also underwrite you, especially if you have no real estate experience.

A partner is probably your best bet where the partner will help bring in cash for down payment and assist in securing the loan.

Damien Papillo · Answer

@Michael Peiro I wouldn’t mind linking up and potentially becoming a partner.

Dan Biber · Answer

Great question.  Don't give up if you have enough time in the contract to find a solution.  Best approach would be to find a partner or several partners with whom you share common goals with.  Pull your resources together and be able to acquire the property.  You'll need the following all combined together with all partners: cash for down payment, net worth equal to loan amount, post close liquidity.  While you keep looking for deals, also look for partnership opportunities.  It could be a passive investor opportunity with a local operator from whom you could learn, get experience, partner on future deals, etc.

Thanks for reading.

Dan Biber

Jaysen Medhurst · Answer

Both @Evan Polaski and @Arn Cenedella have offered solid advice here, @Michael Peiro. A commercial loan on your own with no experience is going to be very difficult, especially now with lending standards tightening. If partial owner financing is possible, make sure you talk this though with the bank. They might be okay with it, they might not. I've had more than one commercial lender tell me that they wouldn't do a loan higher than 80% LTV total. So, 10% down, 10% owner financing, 80% bank financing would not have been possible.

Michael Peiro · Answer

@Jaysen Medhurst ok thanks. I think I will go for a duplex and start with a small multi family. Thanks

Michael Peiro · Answer

@Evan Polaski thanks for your help

Michael Peiro · Answer

@Arn Cenedella thanks for your help.

Arn Cenedella · Answer

@Michael Peiro

Owner financing.

Get a loan for say 80% of the purchase price from a bank. Thats $608,000.

Plus your $70,000 down equals $678,000.

Then have owner carry a loan for the remaining balance $82,000.

You would make payments to the bank and owner.

Michael Peiro · Answer

@Arn Cenedella

Thanks. But what do you mean “The owner carry some paper”??

Arn Cenedella · Answer

@Michael Peiro

Unless the owner will carry some paper, you will probably need to find a partner.

How to buy a multifamily unit??

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