Apartment deal, what's valid for a down payment?

3 Replies

Hiya BP peeps.  

I've got some HELOC money, though we're planning on moving across the country within the next two years, at which point the HELOC should be paid back (housing crash in Seattle nonwithstanding).

Are those funds considered valid from a downpayment perspective for a commercial apartment deal?

I'm wondering if it is worth it to spend time on that now or wait until we have a few more SFH transactions (and cash) under our belt. If it's not a valid source of funds for a commercial deal then I know what else I should be focusing on.

@Steve French - it really depends. I have had banks verify where every dime was coming from and if it created any other debt servicing. If it did, they would just look at my global cash flow and make sure it could be supported.

Then I have had other local banks just look at my personal financial statement, and didn't bother to verify where the cash came from as long as it didn't put a lien against the property. I just had to show up at closing with the cash. They really just focused on the property and making sure it meet their criteria.

@Steve French yes you can use those funds from your HELOC as verified funds on a commercial deal. I have done it a couple times and my bank doesn't care if the funds come from a HELOC or savings as long as our financial ratios for the loan still meet their minimum requirements. And I would say jump into commercial immediately rather than buying onsie twosie on the SFR. The problem now is finding commercial deals. Hard to make the numbers work especially when you are essentially putting nothing down (using HELOC as down payment).

Shouldnt be any issue with using it but you will need 20 to 25% down and if you dont have a history the banks are less likely to loan you cash.  They want to see that you have successfully managed and owned properties in the past before they will accept a deal from you.  So you might need to partner on the first few with someone who has done it before. 

Jeffrey Holst, Real Estate Agent in Tennessee (#343371)

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