Indy Lenders - Multifamily 15% down option??

[Ivan May]

Hey all,

Last year I worked with a local lender on a single family property and initially was told 25% down was my only option for an investment property. I knew that wasn’t the case and pushed back on the lender and ended up with a 20% down and 25 year term. I wanted to double check to see if I am able to possibly do 15% down as an option? I’m aware that some investors are able to go with this option so I would like to confirm before moving forward with a new lender.

My plan is to purchase a 2-4 unit property by end of Q4. Grateful for any advice or assistance with this question.

Best,

Ivan

[Timur Abdullin]

Quote from @Ivan May:

Hey all,

Last year I worked with a local lender on a single family property and initially was told 25% down was my only option for an investment property. I knew that wasn’t the case and pushed back on the lender and ended up with a 20% down and 25 year term. I wanted to double check to see if I am able to possibly do 15% down as an option? I’m aware that some investors are able to go with this option so I would like to confirm before moving forward with a new lender.

My plan is to purchase a 2-4 unit property by end of Q4. Grateful for any advice or assistance with this question.

Best,

Ivan

Hi Ivan,

I'm not a local Indy lender but I am a lender, the private/hard money type. As you, I am interested in the Indy market for lending and for buy-holds. Please see my response below.

The down-payment % is one of many lending terms you see in your contract. Since RE is a business its highly negotiable at most of the stages of acquisition. However, to manage risk each participant in the deal "greases his own conveyor belt rollers", so to say. This means that some of these lenders, since we are talking about lenders, more specifically, will want to "play it safe" by going with an industry-accepted, i.e. a rule-of-thumb type of a term. The 25% is their default fraction.

Though the 25-percent down-payment is once such rule its not set in stone and its not enforced by the "thought police". Its only a rule-of-thumb. In the wild you will see fractions such as 0%, 3.5%, 5%, 10%, 15%, 20%, and 25%. Fraction for a commercial acquisition will commonly be 25%+.

My advice: talk and negotiate. Put together a list of local and national lenders. Get each of their  terms. Find out if negotiation is possible - some lenders are more flexible to negotiating whilst others are too rigid (think national banks).

Make 1/3 of your lender list federal credit unions. The FCUs have some of the sweetest terms around.

Hopefully my advice will help you along your path. If you need more advice, please don't hesitate to post here or to PM me.

-Tim.