Financing small multi-family with low money down

7 Replies

As far as I have found with my research, there are not any lenders who are doing low down payment options for non-owner occupied 2-4 unit properties. If you have found financing like this, please let me know!

I do not want to go hard money as the properties I am looking at do not need a ton of work so there is not much equity to be built in for refinancing. The other option I have found would be owner financing. The problem I find with that is owners typically want large down payments as well.

Anyone with any other ideas?!

Kyle Soderman

    Also, I do have another property in St. Cloud, Minnesota that I could potentially pull some equity out of. What's the highest LTV you have seen with something like a piggyback or HELOC?

    Thanks!

    Kyle Soderman

      Start calling credit unions in your area. Be prepared to call or stop by several banks. Be sure to ask for the lending officer. The first time I asked my prefered lender, the teller told me that,don't make the kind of loans I was looking for. Fast forward, I now have a loan and HELOC with them.

      @Kyle Soderman if you exclude seller financing because of its property specific, so you can't do it across all properties then you are left with Conventional, and portfolio options.  Conventionally is simple, 25% period, does not matter what lender you go to its a national guideline for both Fannie Mae & Freddie Mac no lender can write a conventional loan and deviate from this guideline.  Here is the link to Fannie's documentation (page 2) https://www.fanniemae.com/content/eligibility_info....

      As for Portfolio that is where it gets interesting.  The majority of commercial (local) banks live on this type of lending.  With some rare exceptions they require 25% down, there are a few that will do 20% down, but I recently called one and they flat out told me they were not doing 20% for new customers only existing.  You needed to have at least one 25% down loan and a checking account with them to consider 20%.  These lenders have good rates, terms vary tremendously, and they are balloon loans in all cases.

      There are some national portfolio lenders that will do less of a down payment.  We have relationships with a couple of these lenders.  One offers 80% Loan to value, the other I believe offers 85%, however, I just looked for the documentation and could not confirm that tonight.  These lenders are noticeably higher priced, but they do not have balloons and they offer 30-year terms where you will mostly find 20-25 years in the commercial banking world.

      All of this leads to house hacking as the best first few transactions, unless of course, you have access to more investable dollars than most new investors.

      Tim Swierczek, Lender in WI (#103522) and MN (#103522)

        I don't have any specific leads, but I know some credit unions are doing 100% LTV financing for a residence now. Not sure if your other property is your home or another investment, but it would be easier to do if it was your home.

        If you want to PM me, I can give you a mortgage guy I use that has some creative options for you.

        @Kyle Soderman use a local credit union. Typically they will give you 80% LTV, 5 year note amortized over 20 years

        I have used the following strategy several times, obviously it needs to be a deal that cash flows enough to take on extra debt and you need a seller that trust you. 

        1. Bank 80%LTV
        2. Seller Held Second Mortgage - 10%
        3. Close on the 1st or 2nd business day of the month to take advantage of that months pro-rated rents.  (Those get credited to you at closing) 

        =

        8-9% down payment . 

        Mario Brown

          Originally posted by @Kyle Soderman :

          As far as I have found with my research, there are not any lenders who are doing low down payment options for non-owner occupied 2-4 unit properties. If you have found financing like this, please let me know!

          I do not want to go hard money as the properties I am looking at do not need a ton of work so there is not much equity to be built in for refinancing. The other option I have found would be owner financing. The problem I find with that is owners typically want large down payments as well.

          Anyone with any other ideas?!

          HI Kyle,

          Just because you use hard money doesnt mean you're stuck in there. You could use hard money to get into the deal and then immediately refinance out by eithering paying off the current hard money loan or even obtaining more money back then you had put in the deal if you purchased a deal that was worth more than what you paid for it.

          Example:

          10% down payment on a fourplex, where by the 10% down payment was held in a separate collateral account and the HML or hard money lender wires in & records a lien for 100% of the purchase price, closing, and points, interest carry, etc.

          After you fund/close with the HML you go down to your local lender

          You purchased this property for an all in cost of 100k but you feel confident the property will appraise for 133.3K (75% LTV - loan to value)

          You refinance the entire 100k into a 30 year fixed loan around 500 per month payment down from your HML interest only payment of 1000-1200 per month. Now you cash flow beautifully...

          Your HML releases your 10% down payment collateral account and voila you have a deal with no money in the deal (infinite return)

          This all sounds great but assumes you found a great deal and has very little to no rehab as you mentioned above.

          Hope that helps.

          Albert Bui, Lender in CA (#345453), WA (#345453), TX (#345453) and TN (#345453)

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