How do I finance this deal?

Question

My Plan:

Purchase (2) adjacent properties, (3) family and (2) family (separate deeds.)   I want my downpayments on each to be as low as possible.  A loan representative told a can do 1 closing, 1 loan.   Another mortgage rep. told me I need to do 2 closings and pay all the costs associated with 2 purchases.  I want to put down as little as possible because I need capital to pave the driveway, side one of the buildings, etc....
The purchase prices would be 80K (3family) and 50K (2family).  I would like to finance the closings costs as well. I think they will be about $4500.    What is the best possible way to structure this?

Justin Davis · Answer

In my experience you will have to do two different loans. The few programs out there that will do blanket residential loans are fairly new and 5+ properties are required.

Let's face it. If there's a bank willing to do a blanket loan on only two residential properties the news would be out. I' haven't heard a thing!

Justin Davis · Answer

Also,

I noticed that you would like to finance the closing costs. That implies that you intend on getting 100% financing and then some. Even if a bank will go to 100% LTV they're going to want the closing costs to be paid for (upfront, by you). If it's a rate and term or cash out refi that's a different story.

The exception is if you were to purchase the property under the appraised value. Let's say you pick it up for 95%. Should you aquire 100% LTV financing that would leave you 5% for closing costs.

Remember.... The banks currently doing residential blanket loans will not go above 80% LTV and will not go below 5 properties!

I hope you found this info. helpfull.

Scott Miller · Answer

I leaning towards "no" for a number of reasons---

1)  The three programs that I'm aware of require a min. of 5
2)  Blanket loans are traditionally a commercial product and most won't consider any property types other then commercial.

That being said, there might be something a local brick and mortar bank might offer that might do the trick...

I'm in the early discussions with a 4th investor for a residential blanket loan that has a pretty min. loan amount (50K)---they could be the ticket, but I'm unsure at this point.

Regards,

Scott Miller

Jim Gordon · Answer

Scott you really don't think that he can get a blanket mortgage to cover the 2 properties?

Scott Miller · Answer

I'm unaware of a portfolio loan program that allows only 2 residential properties (most require 5 or more units), so I believe that you will need to do two closings/loans.

Financing the closing costs is a simple fix---ask your lender to provide you with a "no cost" loan (a no cost loan is when the closing costs are rolled into either the loan amount and/or interest rate and the lender essentially foots the bill at the expense of either a higher loan amount and/or higher interest rate).

If you are seeking to do this because you are short on cash reserves, you will most likely run into problems with the cash reserve requirements most NOO lenders require.

Regards,

Scott Miller