Three duplexes or one six-unit property???

Question

Hello all, my brother and I own a total of 3 properties with a 4th under agreement (has not closed yet - fingers crossed). Working on another deal where the current owner had 3 duplexes and changed the deed to a 6 unit multifamily to save on taxes. Looking for input on a couple of topics -

Do we evaluate the deal as three individual duplexes or as a six unit property?

We've never done a commercial loan as all current properties are 4 units or less. Looking for input on how to get a commercial loan and evaluate the deal from that perspective. I have only evaluated using conventional loan numbers.

Located in Mass

Thanks in advance!

Andrew Palumbo · Answer

Thank you both, good info.

Matthew Crivelli · Answer

30 year notes are available from the private side. If the buildings are on one lot it is considered 6 units, the lending process is more expensive and takes longer. You will need a commercial narrative report (commercial appraisal), possible environmental report and the land may need top be surveyed to get the proper ALTA endorsements from title. Close times are 45-60 days on average.

Bruce Runn · Answer

I had something similar.  I bought it using a commercial loan.  The interest rate is higher than a residential loan, is based on 25 year amortization, and have a balloon at 5, 7, or 10 years.  For my long term holds, I prefer a 30 yr mortgage with lower rates as I want to lock in long term on that.  I always assume interest rates will be higher in the future since we are at historic lows.   I bought the property, did a lot split to separate the duplexes and refinanced and saved a lot of $ long term with no downside in rising interest rates when the loan comes back up for it's reset.