Funding a 6 unit multifamily

6 Replies

I have an opportunity to purchase a 6 unit multifamily, and I would like to buy and hold.

PP 130k

Renovations est. 50k?

ARV est. 250k

One unit is renovated and rented for 700/month.

The other 5 need to be rehabbed.

Gross rents when done will be 4k/month.

I am trying to navigate how to finance this, and I'm new to commercial real estate.

Will a bank lend on this, with 5 of the units not occupied and needing to be rehabbed?

Is my only option hard money brrrr or seller financing?

I'm just looking for idea on how to finance this thing.

Thanks!

A commercial loan typically will require minim 80% stabilization so don't lose time with these. Based on your numbers you have to jump on this deal before someone else snatches this up. Even with HML this is a great deal. As soon as you stabilize it you can go an refi with a commercial low rate loan. Better yet go with rehab or bridge loans which will be even cheaper while you fix and rent it. Seriously tho, better get there tomorrow and sign the contract and start your due diligence. Depending on your location I can refer you to a few lenders.

@Brandon Pain Farrukah is right a HML is totally a fine way to go in this situation. If the property were much more expensive, say 5 to 10 times as a much, a bridge loan might be a possibility but they rarely lend under $500k or $1m. Seller financing, heloc on a personal residence with equity, get an equity partner with cash or a line of credit. My first 4 deals were financed using credit cards but that was 20 years ago and the cards have wised up to some of the strategies.

Don't lose this deal. Figure out how to make it work, even if you only get a piece. A piece of a great deal is better than 100% of nothing.

You should be able to get a HML for this, but if not, try hard to get it seller financed until it is stabilized then refinance commercial. If you can't find a HML for this, find a money partner (friend, rich uncle, colleague, acquaintance, etc.). You got this, Good luck!

My question is how much experience do you have rehabbing? The reason I ask is because $50K rehab for 5 units seems very low. I do my own rehab and its a bit over that with no labor cost, so that estimate makes me a little nervous. Besides that I am a hugee proponent of seller financing, I would definitely try that first before HML

@Brandon Pain   I agree with Cole's comment above, $50k seems very low.  I rehabbed a 5 unit and it came closer to $100k. Depends on how you define "rehab" but for me I updated electric and plumbing and those alone were a lot.  It's multi-unit and typically would have to pull permits, use licensed electricians and plumbers, and get inspections, all before closing walls and starting sheetrock.  If you're doing more cosmetic, yes it could be cheaper but I don't think that would force a lot of appreciation.

I used a small local bank for my purchase + rehab financing, a bank that knew the property and area, and even though it was vacant, they knew the rents, and did an ARV appraisal and lent 75% off that number. So that way no surprises that it doesn't appraise.

Good luck!

@Brandon Pain Yes this is something we do all the time. Local community banks do this all the time. Most local commercial lenders will do a purchase/renovation 12 month line of credit. It will be 80% of total project cost and the line of credit will be interest only for 11 months with a balloon at the end. That’s how I structure them for many of my customers.

Good Luck!