How are you funding your 5+ unit multi family units?

Question

What is the typical way that you fund your 5+ unit multi family deals? I was told that 4+ is considered commercial. Any private money lenders who do commercial no doc loans? I am In looking to purchase In Louisiana and Georgia

Diana Dorantes · Answer

@Justin Lee We just closed on a 5 unit yesterday.  20% down, 25 year loan, readjust every 5 years.  We found a smaller community bank.  We have a few banks in our area Chicago suburbs, which have good terms.  It just takes a bunch of calls to find which ones will work for you.

Mary M. · Answer

@Justin Lee commercial loans require documentation. In general you need to have assets equal to the amount you want to borrow.  It is a bit different than a regular mortgage but the loan folks want to ensure you have the wherewithal to pay the loan off

the biggest issue I see now is the amount of cash reserves needed. 20-30% down and upwards of a year and a half of principal, interest , taxes and insurance.  This is in addition to you being able to make your regular monthly payments. It is a lot of cash!

Mary M. · Answer

I just did two small balance fannie loans....  they are requiring 20-30% down, 12-18 months of PI and TI reserves -  the loans are happening very slowly due to how much volume they are having.

Call a local commercial loan broker they will be your best bet.

ETA my experience was that small local lenders are having to use a higher interest rates (6-7%)to calculate the loan which  can really make the loan not useful!

Casey C. · Answer

1-4 units is residential and 5 units and up is commercial. I use small community banks and credit unions for financing. For a commercial loan with bank financing, they typically require 25% down and will give you a fixed rate for the first 5 years of a 20 year loan. Sometimes they require you to hold reserves in an escrow account for a fixed period of time.

Alex Bekeza · Answer

@Justin Lee If by no doc you mean no tax returns or pay stubs (No DTI) then yes there are absolutely 30 year fixed 5 + unit options out there.

Austin Ojimgba · Answer

@Justin Lee, 4-5 Units and upwards are considered Commercial Properties. Most of the answers here are pointing you to a conventional Loan which i believe is not what you're looking for, according to your post you indicated seeking a Private/Hard Money Lender that has a No Doc Loan program. I work with multiple Direct  Private/Hard Money lenders that lends on all types of Commercial Properties also you can search for Hard Money Lenders here on Bigger pockets. CLICK on Network and you will see recommended Lenders and then search through it. Never pay any upfront fees to any Lender cause no Legitimate Lender will ask you for an upfront fees, although there are closing cost that will be associated with your Loan if approved but those cost are disclosed to you upfront and it's only paid at closing expect Appraisal fees you're not obligated in any way to accept the terms unless you find the terms appealing to you and you decide to move forward with the Lender. Good luck, i hope this helps.

Chris Levarek · Answer

@Justin Lee This is correct. Browse lenders on BP, call some and ask around. Get feedback on BP for those same lenders and other investor experiences with them. It's actually much easier in my opinion then residential financing with the right lender.

David Robinson · Answer

@Justin Lee I work with multiple lenders that finance a 5 plus deal. A good way to find one is find an area you like and fits your formula, and check listings or call a local agent or connect with one from BP, and let them help you find the deal. Message me anytime to warn learn more about the lenders I work with.

Arthur Bailey · Answer

@Diana Dorantes message sent. Thank you.

Diana Dorantes · Answer

@Arthur Bailey I went with a local bank in my area that I had used for a few of my other properties.  OSB Has several branches.  They said they can do most of Illinois, the numbers just have to work.  If you want more specifics PM me.

How are you funding your 5+ unit multi family units?

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