5 unit multifamily financing

9 Replies

Hello BP,

I came across what seems to be an amazing g deal. I have a 5 unit multi family in Warren MI, off market. Needs rehab through out, however, I have no money but this deal is too good to pass up. I was wondering if you could get an FHA/203k loan for a property with 5 units. If not id really appreciate any recommendations to someone with money that i could partner with.

Thank you,

Austin

As far as I know all FHA products are limited to the residential market so four units or less.

@Austin Kuritz If you have any credit and or a partner who does you may consider a hard money loan to get the project underway. Then get the property performing and then refinance. Most important thing when starting is to make sure you look appealing to a lender. if not you are spinning your wheels.

Thank you, I don't know why I didn't think about hard money very helpful

Put it under contract with a financing contingency of 30 days. Then shop lenders. Hard money is a last resort or if your credit is bad. A local bank is your best bet, but you need to have money to put down. This is where family and friends can help you. You do all the work and cut them in on the equity once you refinance after repairs. Or, wholesale it.

As everyone else mentioned; FHA is a residential loan, defined as 1-4 units. 5+ units are considered commercial so you would be looking at a commercial loan or hard/private money.

@Austin Kuritz   Agreed with statements above, local bank and their commercial lending department is your best approach.  You most likely will need to tap friends and family for liquidity.  Keep in mind even if the bank funds the rehab, almost always you'll have to do the work first and front the expenses, and then you'll be reimbursed after in a "draw schedule" as it's inspected.  Things to ask about when discussing with the banks, as every bank is different.

Definitely put together a package with all the numbers: projected rents, rehab estimates and schedule, etc.

Good luck!

- Tom

Talk to a commercial lender at a local bank. It is likely you will need 20% down from another source. Be prepared with your expenses and rents so the lender can see if it meets thier DSCR. Any chance of owner financing?

Some commercial lenders offer a period of interest only and will allow for repairs as long as the NOI works to cover the DSCR. Believe it or not, if you ask, and ask the right person at the community bank, they can work with you. Very few bankers have the ability to think outside the box, so you have to guide them to what you want and need.

very helpful information thank you everyone!!!

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