Multifamily Property Downpayment

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Multifamily Property Downpayment

Nicholas Sheridan, Jr.
Investor 路 Denver, CO 路 Member since 2016 路 181 posts 路 242 votes

I have taken the BP advice and reached out to 15 lenders (of all different sizes) in hopes of finding one who required a lower <25% down payment on a 2-4 unit property but have had no luck. This is my first property and I would like it to be a multi instead of a SFH. I am short about $10-15k and although I could wait and save up the difference, I would truly like to meet my goal of purchasing the property by the end of next month. 

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Dan Gamache
Lender 路 Boston, MA 路 Member since 2019 路 417 posts 路 150 votes
6y

@Nicholas Sheridan, Jr. look for properties that need rehab and use the BRRR method. You can get an initial fix n flip loan with 10% down of total costs (purchase + rehab) as long as you buy it right, you can refi into long term loan once rehab is complete to 75-80% of new appraised value. If you are looking to buy rent ready you need minimum 20% down (assuming this is investment property).

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  • Chris MasonPro Member
    Moderator
    Lender 路 CA 路 Member since 2015 路 9k+ posts 路 10k+ votes
    6y

    When Fannie and Freddie are the same, dialing for dollars usually isn't that productive.

    Fannie: 

    https://singlefamily.fanniemae.com/media/20786/display

    Freddie:

    http://www.freddiemac.com/singlefamily/factsheets/sell/ltv_tltv.htm

    There's some non-qm stuff @ 80% LTV, but it'll be tough to swallow the rates/points/terms. Less down payment, but overall more expensive mortgages. They also tend to be more stringently underwritten and close slower, with more headache. If I know someone is shopping around and cold calling me, I probably will not present the option. I'll deal with non-qm from time to time, and I'll deal with shoppers from time to time, but not both at the same time, certainly not during the coronavirus refi boom. You spoke with 15 lenders that also didn't present the option (who presumably have the exact same license that I do), evidently they are in agreement with me.

    1Reply
  • Dan Gamache
    Lender 路 Boston, MA 路 Member since 2019 路 417 posts 路 150 votes
    6y

    @Nicholas Sheridan, Jr. look for properties that need rehab and use the BRRR method. You can get an initial fix n flip loan with 10% down of total costs (purchase + rehab) as long as you buy it right, you can refi into long term loan once rehab is complete to 75-80% of new appraised value. If you are looking to buy rent ready you need minimum 20% down (assuming this is investment property).

    4Reply
  • Lillie MAnon
    Rental Property Investor 路 Bristol, CT 路 Member since 2016 路 30 posts 路 17 votes
    6y

    @Nicholas Sheridan, Jr. you can use fha. You only need 3.5% down. I am in the process of refinancing a multi with Loan Depot. They allow refinance up to 95% LTV, which is unheard of for multi. I wonder if they allow the purchase up to 95% 馃. I'll have to look into that.

    But refinancing from fha to conventional with just 5% equity on a multi is truly a game changer for the BRRR strategy!

    2Reply
  • Dan Gamache
    Lender 路 Boston, MA 路 Member since 2019 路 417 posts 路 150 votes
    6y

    @Lillie MAnon I may be wrong since I don't offer FHA, but I thought they were only for owner occupied properties.

    0Reply
  • Lillie Manon
    Investor 路 Philadelphia, PA 路 Member since 2020 路 2 posts 路 0 votes
    6y

    No you are right. They are only owner occupied but you only have to live in the property for a year. That鈥檚 obviously nor feasible or desirable for everyone. 

    0Reply
  • Lillie Manon
    Investor 路 Philadelphia, PA 路 Member since 2020 路 2 posts 路 0 votes
    6y

    You are right, I didn鈥檛 realize you weren鈥檛 planning to live there.  They are only owner occupied but you only have to live in the property for a year. That鈥檚 obviously nor feasible or desirable for everyone. 

    0Reply
  • Randolph Brown
    Member since 2020 路 12 posts 路 0 votes
    6y

    @Dan Gamache what do you mean buy it out right?

    also how does it work if you only refi 75-80 what happens with rest? Forgive me I'm new to this.

    0Reply
  • Account Closed
    Kingsland, TX 路 Member since 2018 路 164 posts 路 86 votes
    6y

    Will you be owner occupying the property? If so, you may be able to use the Fannie Mae Homestyle Loan Program. I think the down payment is under 25% for 2-3 unit properties. This loan also allows you to bundle any rehab costs into the mortgage. Also look into FHA loan and FHA 203k loan.

    1Reply
  • Nicholas Sheridan, Jr.
    OP
    Investor 路 Denver, CO 路 Member since 2016 路 181 posts 路 242 votes
    6y

    @Dan Barli That is a good point. And FHA is out of the question unfortunately because I will not be living there.

    0Reply
  • Patrick Menefee
    Real Estate Coach 路 Charlotte, NC 路 Member since 2016 路 399 posts 路 341 votes
    6y

    @Nicholas Sheridan, Jr. As @Chris Mason said, when Fannie and Freddie say no it鈥檚 difficult. You have options, but before making a decision I鈥檇 ask the purpose behind your goal? What鈥檚 important to you? Why does it have to be RIGHT now? Why does it have to be multifamily? Which is more important? Is it worth paying more for a loan that fits your goal? If yes, how are you going to pay for the higher fees? If it has to be a multifamily right now and higher fees are unacceptable, why not owner occupy? Setting goals are great, busting @$$ to hit them is even better, but know why you鈥檙e chasing what you鈥檙e chasing. And the answer should ideally have true meaning to you

    That said, you have these options that I鈥檓 aware of:

    Short term loan/hard money-an option if you can force appreciation to refi, but still requires some down payment and fees are extremely high

    Commercial loan-if you shop around a bunch you may be able to find one that will do 80%. Fees will be a little higher but not as high as short term money. Biggest downside is loan term-likely 5yr fixed with either balloon or variable rate, plus 15-20yr amort schedule meaning much higher monthly payments

    Private loan/seller financing-find a place where the seller is willing to finance, or find a rich friend/family member to act as the bank. Difficult to find, amazing if you do. I wouldn鈥檛 bank on it

    Owner occupy-it sounds like this isn鈥檛 an option for you, but it鈥檚 almost the only way you鈥檒l get a 30yr fixed rate from a bank on a multifamily

    Buy single family-if timing is the most important to you and you HAVE to buy a deal next month with 20% down, find a good single family

    Find a discounted multifamily-obviously will be at a lower cost than a single family, making this difficult. But this truly seems to be the only way you can meet your timeframe, with your target property class, without paying extra, and without owner occupying

    Save more money-wait until you have the money for a 25% down payment

    2Reply
  • Matt Rosen
    Lender 路 Honolulu, HI 路 Member since 2008 路 166 posts 路 46 votes
    6y

    Hi @Nicholas Sheridan, Jr. there are allot of questions we can sort through. There are private lenders doing long term 30 year non owner occupied loans. Only problem is your LTV ask especially on your first deal. Would like to know more about this project as there might be creative ways to get your down lower.

    Matt (808)741-3700

    0Reply
  • Raman Saka
    Member since 2020 路 23 posts 路 12 votes
    6y

    @Nicholas Sheridan, Jr. you should see if Commercial loan will work for you. May be chat with @Fred Shatzoff and see if he can come up with a creative plan to fund your first purchase. 

    Best of Luck !!


    1Reply
  • Ryan KellyBusiness Member
    Real Estate Broker 路 Austin, TX 路 Member since 2018 路 1k+ posts 路 1k+ votes
    6y

    @Randolph Brown When you refi, you can usually take up to 75% of current equity out, and the 25% remains as equity in the property to reduce the risk for you and the lender.

    [email protected]512-674-5478
    Ryan Kelly Group - Keller Williams5112 Reviews
    WebsiteView Page
    0Reply
  • Scott WolfPro Member
    Lender 路 Boca Raton, FL 路 Member since 2014 路 1k+ posts 路 959 votes
    6y

    @Nicholas Sheridan, Jr. find a partner for the remaining 10-15k. 

    2Reply
  • Nicholas Sheridan, Jr.
    OP
    Investor 路 Denver, CO 路 Member since 2016 路 181 posts 路 242 votes
    6y

    @Patrick Menefee thank you, those are all good points.

    0Reply
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