Looking to purchase a fourplex, down payment trouble

26 Replies

I am looking to purchase my first property, it is a fourplex. I have some money saved up but not enough for the 25% down on a conventional loan. What are some of the best alternative ways to finance or come up with the down payment? Thanks in advance!

Look for a different lender.  There are quite a few out there, online or brick and mortar, that only require a 20% down payment on a non-owner occupied real estate investment.

Or, if you are going to live in...or could change things around and choose to live in...one of the units.  Then it would be an owner-occupied property and you could get away with as little as 5% down for a conventional loan.

Originally posted by @Sean McManus :

@Andrew Postell

Investment property

2-4 unit investment, 25% down is the standard (SFR is different)

I get spam from lenders offering 20% down 2-4 unit, but you call them up for a scenario and they come back with points/fees/rate combo that kills cashflow and no one will want. And it's not really 20% down, it's more like 20% down plus a couple % in extra junk fees. If you really want to, you can call an independent mortgage broker and ask them to open their junk mail folder (you might have to say "hey I know the rate is going to be trash and fees ridiculous, I'm not going to hold it against you, I know it's on me for asking this..."), but I'm already telling you how it ends: "Wow that rate is horrible, those fees are horrible, I think I'll just save the extra 2% or 3% (not 5% 'extra' b/c of aforementioned fees)."

@Sean McManus coming up for a downpayment is difficult for nearly everybody. That's the whole reason why the BRRRR method is such a great strategy. Have you heard of or read about the BRRRR method? It's basically you buy a property off market, rehab it, rent it, refinance it, and repeat. Going that route will help with your downpayment issues. Let me know if you have any questions on this topic and we can certainly elaborate. Thanks!

@Sean McManus , could it be your primary residence for a year? And by could it be, I mean actually, for real, you'd live in it, not just "say" you're living there but live somewhere else. That's mortgage fraud, punishable by up to 5 years in prison, felony record for life, etc. (NOT suggesting you would commit mortgage fraud, just sharing this bit of info.)

Owner occupant loans can have a much lower down payment, and typically only come with a one year occupancy requirement.

@Sean McManus I’ll tell you this may not be the best way to do it but it worked for me. I utilized a personal loan for a partial down payment. This end up being $375/mo my cash flow before expenses was $700 more than enough to cover the loan. Paid it off when I had the money to do so.

For reference the 4plex was under my LLC , Perosnal loan under my credit keeping my DTI in check.

@Andrew Postell

Hey Andrew thanks for the info! I am currently reading David Greene’s book on the Brrrr method, still learning about it. Thought it might would be more difficult to do on this particular multiplex. The units are already occupied and I would have to wait for leases to expire to do some rehab work to increase the value and raise the rent. I thought maybe it would be better to do my first deal or couple deals with more affordable single family’s and use the Brrrr process to increase my capital and be able to afford larger down payments. Thoughts?

@Mindy Jensen

Thanks for the feedback, I thought about doing the live in route but it would be tough, with the location of the unit and my current job it would add about 30 min to my commute. Which is do able I’m not just not quite willing to do it lol

1) Raise the price $x and have seller credit $x at close 

2) close late in the year / early in the month to maxamize credits 

3) HML for the second

4) Ask seller to partial carry 

5) friends and family loan. 
6) early cash out of 401k. Or CC

If it’s a good deal, do what you gotta do

lots of ways dude. It’s been a problem for me on most of my early deals and even some of my larger recent deals. it’s a problem you need to develop work arounds for 

Originally posted by @Sean McManus :

@Michael Henry

Thanks for the info Michael, I thought about talking to a hard lender for the down payment money have you had any experience with this?

I've yet to see a hard money lender than will give you money for a down payment unless your doing a BRRR , and even then you will need to bring 10-15%. Is someone tells you otherwise ask specially which lender will do it.


Originally posted by @Don Billingsley:

@Cody L.

Get the financing you need to get your deal done, apply now and get funded in as little as 24 hours. Pm me for more information.

Sorry dude, I won't work with spammers.

And I have zero trouble financing.  If you'd have read my post vs. just spamming everyone your info, you'd have seen I was answering a question. 

Originally posted by @Mindy Jensen :

@Brian Cano Sixto , yes. Residential owner-occupied mortgages are available conventional, FHA, VA, USDA. Maybe others, too. @Chris Mason?

 Conventional 5% down 2-4 unit effectively died last summer, in my market. There might be markets where the prices of real estate are a lot lower, but incomes a lot higher relative to those prices, where it's still doable. In my market if you make enough to qualify for the purchase price, boom you're over the income limit. 

I can't speak for USDA, never done a USDA loan, due to where I'm located. 

FHA, yup.

VA, yup. Call 1-800-Marines, they will take care of you for 4 years, then you can get a 0% down VA loan on a 2-4 unit, no biggie. :)

Originally posted by @Sean McManus :

I am looking to purchase my first property, it is a fourplex. I have some money saved up but not enough for the 25% down on a conventional loan. What are some of the best alternative ways to finance or come up with the down payment? Thanks in advance!

 Find a partner to help with the down-payment.