Multi family loan questions

4 Replies

I am looking into purchasing a multi-family property in St. Petersburg, FL. I am a new real estate agent and have been researching investment properties for the past 1 1/2 years so I am fairly confident in running the figures as far as having positive cash flow, but I still have a few questions regarding hard money loans. The property I am looking at needs work. I am going tomorrow to view the property to find out how much work it needs. If I take a hard money loan do I need a down payment for them also when refinancing the property would the bank then require a down payment? I am looking to hold onto the property and use it as a rental. Should I also try to get preapproved for a bank loan before the hard money loan to make sure that I will be able to refinance it for a lower interest rate. Is there a different type of loan that may be out there that would be better than a hard money loan?

Thanks in advance

@Amanda Leppert assuming you’re taking about 2-4 units in a multi family (5+ is into commercial loans)..

If you're looking to buy and hold, usually your best bet is just get a conventional mortgage when you buy it. You'll save a few percentage points on your rate, and you don't have to go through closing twice.

If you're looking to buy, then renovate, then refinance (BRRRR), then you will want to buy with cash (or technically a HML). You'll need a down payment, as well as likely paying some points when you close. The loan will hopefully also cover your renovation costs. You'll be paying a higher interest rate, so you'll want to get the renovations done reasonably quickly and increase the value of the property.

THEN, after 6 months (most conventional mortgages will need that for seasoning), you’ll go to your favorite bank or credit union and get a standard 30yr mortgage with them. You’ll need the 20-25% down payment, but that should come out during your settlement. If all goes well, you’ll walk away with some extra cash in your pocket too.

Of course this is just the ‘standard’ way of doing things. There are many permutations depending on what you want to do!

Originally posted by @Amanda Leppert :

I am looking into purchasing a multi-family property in St. Petersburg, FL. I am a new real estate agent and have been researching investment properties for the past 1 1/2 years so I am fairly confident in running the figures as far as having positive cash flow, but I still have a few questions regarding hard money loans. The property I am looking at needs work. I am going tomorrow to view the property to find out how much work it needs. If I take a hard money loan do I need a down payment for them also when refinancing the property would the bank then require a down payment? I am looking to hold onto the property and use it as a rental. Should I also try to get preapproved for a bank loan before the hard money loan to make sure that I will be able to refinance it for a lower interest rate. Is there a different type of loan that may be out there that would be better than a hard money loan? 

Thanks in advance

Hi Amanda,

I just read a great post from Bigger Pockets on the BRRRR strategy. It briefly explains what Mr. Mike McCarthy is referencing on the closing cost being covered. I hope you enjoy it too!

https://www.biggerpockets.com/...