How does financing typically work when building multifamily?

Question

I'm trying to build 2-4 units and live in one of them.

- Is it possible to use projected rents when planning to owner occupancy?
- Is it possible to get financing for 100% of construction costs? I can pay for the land, but can't do much on the remaining
- Are we able to get more leverage when building a multi-unit vs a SFH? For example, I could be approved for $300k to build a SFH, but the approval amount would be higher for building 3 units?

G. Brian Davis · Answer

Hi @Stan J., nice to meet you here on BP! Is it possible to use projected rents: Yes, you can typically use projected rents, especially with 2–4 units and owner occupancy. Lenders will often count a portion of the rental income to help you qualify.Possible to get financing: 100% construction financing is tough. Most lenders want you to have some skin in the game, but owning the land outright helps a lot you may be able to leverage that equity toward the build.

And for the leverage question: yes multi units can actually help you qualify for more since they produce income. It’s not always a straight jump, but lenders do factor in those additional rents.

Stan J. · Answer

I reached out to one of the biggest brokerages in the US and was told that they can't use projected rents. They also told me that I don't qualify for more even though it would be an owner occupied multi unit. Essentially, because they can't use projected rents, I can't qualify for more. Not sure if I'm talking to an incompetent broker, but would like referrals if you have any (or anyone else reading this).