Advice for high LTV financing of multifamily property

4 Replies


I have finally found a bigger multifamily property that I like: 50ish units in a rural but very stable market, not a warzone at all, strong rents, and at around 2 million USD, a cap rate approaching 10%.

Now comes the question of financing and the amount of cash I need to bring into this deal. I have a commercial lender that will finance at 80% LTC for a rate below 5%, which is not bad, but I was wondering if anyone can give advice on how to do the deal with less cash out of pocket? Are there commercial lenders out there that will go up to 90% LTC? Or lenders that will do LTV instead of LTC (which would probably also help since it will likely appraise higher)?

Owner financing seems unlikely, but if I were to somehow convince the owner to finance a small amount, are there commercial lenders out there that will allow this as a second? (The ones I spoke to don't)

Any advice from experienced multifamily investors about how to package it in order to reduce the amount of cash required would be appreciated.


I haven't done this myself but my understanding is that for larger commercial properties, it's common for the seller to carry back a 2nd. The one I heard quoted most often was 10/20/70 (10% out of pocket, seller carry 20%, bank loan for 70%)

I'm interested to hear what you find out.

Hi @Michael Franklin,

this would work well, with 80%LTV I could even do 10/10/80, the question is whether mainstream commercial lenders actually allow seconds. The ones I spoke to said they "don't do that anymore", but I may just need to call. If someone has done this with mainstream banks and can confirm that this still exists in 2015, that would be very useful.

Knowing that this is actually possible would allow me to go place an offer tomorrow (before the thing goes under contract with someone else), otherwise I need a bit more time...


The best option will be an equity play. They will look for about 16% return and stay in for about 3-5 yrs. This is not a 100% option, you will put skin in the game but you'll put less. The deal has to make financial sense in the end for all.

I'll add what additional info I've found out since last week, since I've not made an offer on the property and waiting for it to be accepted:

- this property, and others outside major metros, qualifies for USDA guaranateed Multi Family loans which allows banks to go up to 90% LTV. These loans require the property to be income restricted to some extend, but the income ceiling is pretty reasonable. I am now trying to understand how they will allow someone to convert a non income restricted property into an income restricted one, without kicking out existing tenants...

- there are definitely banks that will still consider a small owner carryback, as long as I also have substantial skin in the game myself. I called 3 or 4 on my list and one was willing to consider this (Mountain America Credit Union), I expect that I'll find more if I call more...


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