New to Real Estate · NY · Member since 2018 · 7 posts · 0 votes
Hello all,
I am a newbie to REI; looking to invest in the Upstate NY area. I have been studying multi families for almost 6 months (reading, podcasts etc). I have seen properties online and figured, it's time to get in. So I called for a mortgage and was told that I need to put 25% down and can only be a 4 unit max. Which I already knew... Also, I don't want to house hack, as I live in the City and don't plan on moving any time soon. Here's where my discouragement comes:
1. I don't want to use all of my saving as a down payment;
2. I want to purchase more than 4 units (Go Big or Go Home);
3. Even if I start an LCC; I can't get a commercial loan without being in business for a while (so I think).
Real Estate Agent · Albany/Schenectady/Troy, NY · Member since 2016 · 74 posts · 35 votes
7y
You could be able to get a 80% LTV commercial loan. They will care more about the specifics on the deal than how your LLC is setup. It has to have solid returns and financials. 5+ units you'll need to go commercial or private money either way.
If you really don't want to sink your money indefinitely, you need to use the BRRRR strategy which involves getting a fixer upper and making your own equity through repairs. Then when you refinance at 75% LTV you can pull your initial cash outlay out of the deal.
Real Estate Agent · Albany/Schenectady/Troy, NY · Member since 2016 · 74 posts · 35 votes
7y
You could be able to get a 80% LTV commercial loan. They will care more about the specifics on the deal than how your LLC is setup. It has to have solid returns and financials. 5+ units you'll need to go commercial or private money either way.
If you really don't want to sink your money indefinitely, you need to use the BRRRR strategy which involves getting a fixer upper and making your own equity through repairs. Then when you refinance at 75% LTV you can pull your initial cash outlay out of the deal.
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
7y
Hi, @Anthia Rymer, unless you partner with an experienced RE investor/manager, you're not going to be able to get a commercial loan your first time out. Lenders want to see experience, especially since the loans are usually non-recourse. This is one reason why most investors start with a 1-4 unit property.
Stay focused on finding a 3 or 4-unit property to gain experience and make your mistakes small.
When you have the experience, the LLC thing won't impact your ability to get a commercial loan. Most large investment properties are owned by single-purpose LLCs.
I would still encourage starting with a duplex or possible 4 plex before jumping into a commercial 5 unit + loan for your first deal. "Go Big" also means you can lose your shirt if you don't know what you're doing. Even a commercial loan to a LLC will still require a personal guarantee, which means a foreclosure on your personal credit if things go south.
There are alternative strategies such as owner financing, partial owner financing, or bringing in a partner for the first deal to reduce your downpayment.
Also the BRRR as mentioned above. I've posted on this a bit, last deal I did was $50k purchase, $25k rehab, and ARV of $110k when complete. I used a small local bank and a commercial loan (even though it was a duplex, commercial loans can still be obtained. It meant the bank kept it in house and had flexibility on the lending). I put down 20% on the $50k purchase ($10k), and the bank covered the rest. I was able to refinance when complete, and got my $10k back and more, to use for another deal.
Golden, CO · Member since 2016 · 145 posts · 61 votes
7y
If you haven't already come across the below thread, I would encourage you to review. Sounds like what you are trying to do follows this type of transaction which addresses the experience, go big attitude and how financing was approached.
BTW, most of the commercial financing you will be looking at will be full, personal recourse. Don't confuse what you are trying to do with institutional lending where non-recourse is possible.
I would still encourage starting with a duplex or possible 4 plex before jumping into a commercial 5 unit + loan for your first deal. "Go Big" also means you can lose your shirt if you don't know what you're doing. Even a commercial loan to a LLC will still require a personal guarantee, which means a foreclosure on your personal credit if things go south.
There are alternative strategies such as owner financing, partial owner financing, or bringing in a partner for the first deal to reduce your downpayment.
Also the BRRR as mentioned above. I've posted on this a bit, last deal I did was $50k purchase, $25k rehab, and ARV of $110k when complete. I used a small local bank and a commercial loan (even though it was a duplex, commercial loans can still be obtained. It meant the bank kept it in house and had flexibility on the lending). I put down 20% on the $50k purchase ($10k), and the bank covered the rest. I was able to refinance when complete, and got my $10k back and more, to use for another deal.
It can be done - Good luck!
- Tom
Tom - Just curious where in VT you were able to find a $50k property?
New to Real Estate · NY · Member since 2018 · 7 posts · 0 votes
7y
@Brian Rosher, lots to think about... I did not want to BRRRR, but can see why it's beneficial. My thoughts were to buy a building needing few repairs and already rented with the goal of remodeling etc as units become vacant. I wanted an occupied building to start since I still have to learn about renting and managing. Are you familiar with Kingston, NY? I am looking there.
Lender · Arlington, TX · Member since 2018 · 465 posts · 184 votes
7y
real estate investing is for the long haul. Just because you start small for your first deals does not mean tbat is where you have to stay. as you make money and learn you will be able move on to a larber multi familt project with much more efficiency than if it was your first.
New England · Member since 2018 · 43 posts · 21 votes
7y
If they wanted 25% down and 4 max, sounds like you were looking for a residential loan. I would recommend seeking out a local institution and talking to the commercial lender. They tend to be a bit more flexible and the economics of the deal itself would be one of the driving factors for approval.
On your first discouragement point, any other option at this stage is likely to require another party as either a part owner/investor, or as hard money with a BRRR.
On point number 2, I wouldn't actively discount smaller buildings, especially at first. You can use them to build out your processes and get through the entire purchase & cycle with less risk to start.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
Part of being a good investor is the ability to raise capital without a bank . Getting started is the hardest part . Realistically how much money in cash do you have to work with so we can help you .
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
@Anthia Rymer. You need lots of money, experience and time to make this work. A partner is probably your best bet. Spend enough time On BP and a good partner will probably find you
Rental Property Investor · New York City, NY · Member since 2016 · 47 posts · 13 votes
7y
@Anthia Rymer Hi Anthia, I invest in Kingston, feel free to DM me to discuss the specifics of your intentions. I also recommend doing some more ground work (calling multiple lenders (res & comm), learning the market prices and rent rates, calling FSBO's, discussing the need for an LLC on your 1st property with an attorney, etc.) Education from books and podcasts is awesome, and talking to actual professionals that are active and doing business in your area of interest is arguably more awesome. Kingston is hot right now, it's very important to have a basic understanding of things before you "go big" so you don't get burned, overpay or fail to have multiple exit strategies just in case the market drops, you have vacancy, you have evictions, you get the point.. Managing property is a doable but serious undertaking, especially from outside the area, and especially in an area as dynamic/diverse as Kingston. You can 100% do it, I just think a little more digging may really benefit you.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
7y
@Emily Auert Hi Emily - Lyndonville. It was an REO but since it's a college town, I've never had an issue renting it once I fixed it up. I've seen <$50k properties in Barre and Rutland, but personally I avoid those areas. I know others on BP who do invest there, but that's my opinion.