Second-Home Loan on a Multifamily Property?

[Gabriel Hamilton]

Hey BP Community!

I'm scouting properties in upstate New York and found a great duplex. It has an existing long-term tenant in one unit and I plan to STR the second unit. My question is: can I get a second-home loan on a multifamily property?

I've run successful STRs in the past (and currently in other markets), I have a great FICO score, and my W2 income is good, but I've only ever heard of second-home loans on single family rentals. Thanks for your input!

[Chris Svendsen]

Quote from @Gabriel Hamilton:

Hey BP Community!

I'm scouting properties in upstate New York and found a great duplex. It has an existing long-term tenant in one unit and I plan to STR the second unit. My question is: can I get a second-home loan on a multifamily property?

I've run successful STRs in the past (and currently in other markets), I have a great FICO score, and my W2 income is good, but I've only ever heard of second-home loans on single family rentals. Thanks for your input!

 Someone much smarter than me will chime in but if not planning on using house as a second home you would be committing fraud to get a loan under second home rules.  Might want to check exemptions on the loan before going for that route.

[Ryan Hastings]

Hey Gabriel! Most of the second home loan programs I've seen specify that the property must be single family. However, if you find a really good mortgage broker they may know of some smaller local banks that might be flexible on that requirement. I've seen a handful of multifamily properties on lakes and other 'recreational areas' that are traditionally dominated by STRs, so I would think that a smaller local bank would be more willing to consider a multifamily in that second home loan program. One of the big things the lenders want to see is that you actually plan to be using the second home yourself, as an actual 'second home' from time to time. 

I'm assuming that you're looking into the second home loan because of the lower down payment? If so, have you considered trying to do a deal with creative finance? All of my lowest down payment deals have come from creative seller finance deals. 

[Gabriel Hamilton]

@Chris Svendsen – definitely planning to use the house for at least a few weeks per year, but I appreciate you looking out for me!

[Gabriel Hamilton]

@Ryan Hastings , thanks for pointing that out. I'll follow up with a mortgage broker – hopefully they can find a lender with some flexibility.

Exactly right. The lower down payment is super appealing, but I hadn't considered any creative financing.

[Alex Breshears]

Hi Gabriel! I agree with what others have commented here, doing a second home loan would require you to actually use it as a second home (so spending at least 14 days a year there) and likely only allowing a SFH. As someone who owns and manages STR's, and you said you have some experience as well, I will say I rarely see situations where you have an LTR in the same building as a STR go well. Even if you have a great long term tenant, they may not appreciate the constant coming and going of short term guests, or even the noise they may cause. Or vice versa. In my experience mixing the two is only going to cause problems, which then show up on reviews for the property, and now you have someone who isn't involved in your business dictating your business because reviews are everything in this industry as I'm sure you know! Another idea might be finding a capital partner or someone who would be willing to private lend the funds until you could refinance out into more long term debt.

[Mohammed Rahman]

Hey @Gabriel Hamilton - I'm an agent based out in NYC and an investor with properties in upstate NY. 

There are a lot of ranging comments here, I personally don't foresee any issues with combining a LTR with a STR depending on whatever your goal is. As for getting a second-home loan on a multifamily, yes you can. As long as the multifamily is < 5 units, it would be a residential loan and not commercial.

Shoot me a DM and let's talk offline regarding my experience with buying properties upstate while living in NYC, thanks.