Less than 25% down for a duplex?

Question

I'm looking to buy a duplex in Washington and trying to see if there are ways to put less than 25% down. It's already rented out and looking for unique ideas. Thanks!!!

Chris Mason · Answer

Call an independent mortgage broker.

"Hey Mrs. Mortgage Broker, I want to buy a duplex investment property with less than 25% down. Here is the fully ratified purchase contract, I got to this point without being preapproved because I understand the term holds no value with these wonky loan programs anyways. Because this will not be a Fannie or Freddie loan where the best rates are to be found, I do not expect a great rate or no points, and I understand that it's illegal for you to get paid more if I get a higher rate so you have no incentive NOT to find the best rate/terms/points you can. Open your spam folder or 'junk lender' folder, or whatever you call it, and let me know what you find in it. Thanks, Mark."

That being said if it will be owner occupied, there's a plethora of <25% down programs out there... I kind of assume you already know about all those A+ paper programs, but will not be moving into this property.

Matt Brown · Answer

@Mark Philibosian

I don't think there's a legal binding requirement for the percentage, but rather a lender. I work with SFRs, so a little different, but I have gone to 3 different lenders and got 3 different terms. I'd shop around and ask about it. It's all up to the lenders risk tolerance.

John Barrett · Answer

@Mark Philibosian at the end of the day, we all just people and we have different wants and needs.  I would suggest just reaching out and see if they are interested in selling the property.  Anything you can do to build a rapport with the owners will be helpful.  Is it possible to solve a problem for the current owner: Have they owned the property for awhile (lots of underperforming equity), is this property a nuisance property, do they not want to do the management work anymore?  Any information you can get will help you to understand the seller's motivation is great.

Depending on what is motivating the seller (source of pain) will let you know if they will be open to owner financing.  That said, if the deal is good enough, even if you are unable to close with owner financing, there maybe other options for raising the needed cash.

There are many ways to bring up the option of owner financing but try to think of it from the sellers perspective.  Owner financing can be a great way to mitigate near term taxable gains or allow for time to find and develop a 1031 exchange plan.  It is also a great way for an owner to earn an income stream from the property without having to do the physical work.  The owner can also get a much greater return on their money than is currently offered from a bank without having to take on an additional risk (they know the asset only management will be different).

John

Mark Philibosian · Answer

@Caleb Heimsoth @John Barrett thank you for your advice.

John - how have you found starting the conversation to see if the owner is willing to provide owner financing?

Caleb Heimsoth · Answer

@Mark Philibosian. 15 percent down minimum for single family (non owner occupied) and 25 percent down for multi family

John Barrett · Answer

@Mark Philibosian, I don't know if this is a unique idea but you can always approach the owner to find out if they are open to the possibility of owner financing.  If that is something they are willing to entertain, then it really would just come down to what you can negotiate with them.

I have not used owner financing on but there are a lot of people on here who have an could likely provide you with more guidance.

Best of luck on your investment.

Caleb Jordan · Answer

I am assuming this will not be primary residence. I have heard others talk about getting as low as 15% down, but I don't know the terms or requirements for that. You will also need to 6 months of reserves for most loans.

IF you are able to get the home vacant and IF there is room for a lot of value add you could look into a short term hard money flip loan. you could probably come with much less out of pocket, 15% to 10% while getting funds to rehab the place. Then after you've added value you refi into long term loan using equity as your downpayment.

Less than 25% down for a duplex?

Most Popular Reply