Help figuring out a lending issue for deal w/multiple buildings

General Landlording & Rental Properties
7yFollow

Help figuring out a lending issue for deal w/multiple buildings

Brian H.
Carolina · Member since 2017 · 519 posts · 222 votes

Hi!

So, I am under contract for 11 rental units in 5 buildings. 3 units in one, 2 units in the other four buildings, all on two side by side properties.

I am being told I cannot, per Fannie and Freddie guidelines, finance this with conventional 30 Y residential lending. I was told I would have to originate a conventional loan for each individual building, even though the seller has the bundled in one package.  This would be complex and obviously cost much more in regards to title searches and policies... 

Is commercial the only option here? Normally I would have figured this out before the offer but I had to jump on this deal because it is an incredible opportunity... but now I need to figure out how to finance it.  I have maybe 30k covered from private investors. I was going to use that as part of the down payment to keep as much capital in the business as I can... but I know I cannot line up anymore from private investors that I know.  

Anyone here have experience with a situation like this? Curious if I could grab any advice on how to proceed with this...  The commercial lending seems much more expensive and I am not sure I have been in business (~1 year) long enough or can show enough revenue to qualify in the first place. I can't stand the thought of losing this deal. It is one of those amazing, rare opportunities.

Thank you so much!

1Reply
54 views

Most Popular Reply

Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y
Originally posted by @Brian H.:

Hi!

So, I am under contract for 11 rental units in 5 buildings. 3 units in one, 2 units in the other four buildings, all on two side by side properties.

I am being told I cannot, per Fannie and Freddie guidelines, finance this with conventional 30 Y residential lending. I was told I would have to originate a conventional loan for each individual building, even though the seller has the bundled in one package.  This would be complex and obviously cost much more in regards to title searches and policies... 

Is commercial the only option here? Normally I would have figured this out before the offer but I had to jump on this deal because it is an incredible opportunity... but now I need to figure out how to finance it.  I have maybe 30k covered from private investors. I was going to use that as part of the down payment to keep as much capital in the business as I can... but I know I cannot line up anymore from private investors that I know.  

Anyone here have experience with a situation like this? Curious if I could grab any advice on how to proceed with this...  The commercial lending seems much more expensive and I am not sure I have been in business (~1 year) long enough or can show enough revenue to qualify in the first place. I can't stand the thought of losing this deal. It is one of those amazing, rare opportunities.

Thank you so much!

 Yup, this is a commercial financing scenario if you want one blanket mortgage (that's the google search term btw) on them all. There will still be 5 title searches and 5 title insurance policies, so not much of a difference there. 

You could do it as 5 concurrent Fannie loans which would be a pain in the  butt, however at the end of the day it would be better financing. 

1Reply
See this reply in the discussion

9 Replies

Jump to latestLatest
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    7y
    Originally posted by @Brian H.:

    Hi!

    So, I am under contract for 11 rental units in 5 buildings. 3 units in one, 2 units in the other four buildings, all on two side by side properties.

    I am being told I cannot, per Fannie and Freddie guidelines, finance this with conventional 30 Y residential lending. I was told I would have to originate a conventional loan for each individual building, even though the seller has the bundled in one package.  This would be complex and obviously cost much more in regards to title searches and policies... 

    Is commercial the only option here? Normally I would have figured this out before the offer but I had to jump on this deal because it is an incredible opportunity... but now I need to figure out how to finance it.  I have maybe 30k covered from private investors. I was going to use that as part of the down payment to keep as much capital in the business as I can... but I know I cannot line up anymore from private investors that I know.  

    Anyone here have experience with a situation like this? Curious if I could grab any advice on how to proceed with this...  The commercial lending seems much more expensive and I am not sure I have been in business (~1 year) long enough or can show enough revenue to qualify in the first place. I can't stand the thought of losing this deal. It is one of those amazing, rare opportunities.

    Thank you so much!

     Yup, this is a commercial financing scenario if you want one blanket mortgage (that's the google search term btw) on them all. There will still be 5 title searches and 5 title insurance policies, so not much of a difference there. 

    You could do it as 5 concurrent Fannie loans which would be a pain in the  butt, however at the end of the day it would be better financing. 

    1Reply
  • Brian H.
    OP
    Carolina · Member since 2017 · 519 posts · 222 votes
    7y
    @Chris Mason Thanks for the quick response and the information. Also... What about a portfolio loan? I'm not super educated on those so I'm not quite sure. I'm reading up on them more now. Thanks again.
    1Reply
  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 958 votes
    7y

    @Brian H. a commercial loan may be more expensive for a down payment and interest rate perspective, but it is the best way to do it. Best bet is to find someone in your local REIA with commercial experience, or a commercial mortgage broker in your area. A deal like this, they will find you the best option for financing.


    Good luck!

    1Reply
  • Greg Downey
    Lender · Springfield, MO · Member since 2015 · 379 posts · 180 votes
    7y

    @Brian H. You do need to look commercial as you have more than 4 units per parcel (ie. multifamily). Since the parcels are contiguous, you should be able to do them on one loan. Your income and the business' lifespan are absolute non-factors.  

    0Reply
  • Brian H.
    OP
    Carolina · Member since 2017 · 519 posts · 222 votes
    7y

    @Greg Downey

    I was talking with a commerical portfolio lender today and was basically rejected because of my income not being quite high enough. Any recommendations on where to look? I am googling portfolio and commercial lenders all around me. Sending introductory emails to people in those departments... 

    0Reply
  • Account Closed
    Rental Property Investor · Irvine, CA · Member since 2017 · 33 posts · 15 votes
    7y
    @Brian H. How much is the portfolio worth?
    0Reply
  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    7y

    I’d talk to this guy ^^^^

    0Reply
  • Brian H.
    OP
    Carolina · Member since 2017 · 519 posts · 222 votes
    7y
    @Kerry Baird have you worked with him?
    0Reply
  • Brian H.
    OP
    Carolina · Member since 2017 · 519 posts · 222 votes
    7y

    @Account Closed  They are valued on the tax site at about 160k in total. I am in for $200k. At their current occupancy (8 of 11 units) they bring in about $4200 per month.  After expenses, mortgage,  and setting aside for vacancy, repairs, cap ex, etc. they would currently cash flow anywhere from $1400 - $2000 per month as is.  I have plans to update one unit at a time. They current owners updated two of the units recently and they look nice but not too nice.  They are lower income units but still with good tenants on a quiet street.  The two recently updated units give me a really good idea of how to update the others as I move along.  Nothing too fancy, but nice enough to feel more "homey" than they do now.   There is major value-add potential. That is what I love about this, along with the absurd cashflow potential.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free