Financing for 4-plex in Sacramento, CA

[Jonathon Hunt]

Hi BP - I'm trying to purchase a 4-plex in Sacramento, CA that I can either use as a primary residence (owner occupy one of the units) or as an investment. 

Total purchase price is around $1mm. Property generates $66k in gross revenues per year, $86,500 once stabilized. This is about $1,800 per month per unit. 

I only have between 10-15% for down payment. After talking to a couple of lenders, I'm not able to qualify for conventional because they require 20% down on 3-4 unit properties. I'm also not able to qualify for FHA because properties in my market do not meet the self-sufficiency rules.

Are there alternative lenders with less restrictive lending requirements that could help me out? Have you been in this position before and how did you get it done? Should I consider tapping equity in my current primary residence (single family ~$80k equity)? 

[Chris Mason]

Quote from @Jonathon Hunt:

Hi BP - I'm trying to purchase a 4-plex in Sacramento, CA that I can either use as a primary residence (owner occupy one of the units) or as an investment. 

Total purchase price is around $1mm. Property generates $66k in gross revenues per year, $86,500 once stabilized. This is about $1,800 per month per unit. 

I only have between 10-15% for down payment. After talking to a couple of lenders, I'm not able to qualify for conventional because they require 20% down on 3-4 unit properties. I'm also not able to qualify for FHA because properties in my market do not meet the self-sufficiency rules.

Are there alternative lenders with less restrictive lending requirements that could help me out? Have you been in this position before and how did you get it done? Should I consider tapping equity in my current primary residence (single family ~$80k equity)? 

Even if those FHA requirements went away, the low down payment group only gets a shot once the market has run out of Bay Area tech workers moving to Sacramento with 20% down are all used up. I suspect Sacramento is not close to being out of Bay Area people with 20% down moving to the area and looking to optimize by buying a multi (guess how I'd know...).

Tapping your equity to reach 20% down, so you go conventional, is probably the winning move. Now you can swing with the tech workers.