I am in the early planning stages of getting involved in Multi-Family deals in Louisville KY. Was wondering if anyone has experience getting seller financing to partially finance deals in this space. Hoping to use a combo of commercial loan and seller financing to borrow up to 90-95% LTV. No deals in the works at present but working on getting pre-approved by a local commercial lender (Republic Bank). Are folks seeing deals structured this way in this market? Looking to get involved in class C properties via value add strategy and properties in the in $500-$750k price level (assuming the cash yield / cap rates makes sense).
Just went through the same scenario you're going through about a year ago with a $500K multifamily. I tried to get Republic Bank to to give me an 85% LTV with the seller financing 10% and me putting in 5%. The property was off the market and being sold at a very good price, cash flow was great, property was in good condition, and my credit is really good but Republic still wouldn't accept it. They ended up telling me that at 5% it just wasn't enough "skin" in the game for them.
I tried to get the same deal done with them again this year with me putting in 15% and Republic financing the remaining 85%. They said they would be able to do it but then after running all the numbers and doing all of the paperwork they again came back with a similar response.
I don't mean to discourage you, just want to let you know what you're up against. If you do end up finding a bank that will work with you, post it as I'd be interested.
Hey @Vincent McClendon !
From my interactions with Republic Bank, they tend to be pretty strict on their investment criteria. Have you tried any other banks in the area? River city bank and L&N Credit Union are one's many investors in town use and they tend to be relatively investor friendly. Although I can't promise they'd be willing to fund the deal you're proposing, may be worth reaching out to ask. Second, do you plan on syndicating the deal? If so, you could ask your partners if they'd be willing to personally guarantee the bank loan as well. Although this is not an optimal scenario, it may be the only way a bank would be willing to put their money at risk. Also, have you looked at using private and/or hard money? Although it's often more expensive (7-15%), these individuals tend to be less strict on the down payment requirement than banks and will look more at the investment as a whole. Along with that, they may even be willing to fund some or all the repair costs of the property. You could then refinance the property using a conventional loan and pay back the private/hard money lenders. If you attend the K.R.I.E.A meeting tonight, there are a few private and hard money lenders that regularly attend. Sure-point Equity and Flippin Loan just to name a few. May be worth attending to meet them and ask about their criteria. Hope this helps and good luck!
All the best,
@Sheref Tawfik Thanks for that feedback and for sharing your experience. I'm trying to leverage my LLC and my partner. We are both providing our financials and the LLC has 1 property in it (in my bio). My guess is I'll get a similar outcome as you did, but thats fine by me (for now).
Ill provide updates here once I get feedback from Republic
@Raphael Collazo Thanks for your feedback too. I spoke with L&N (my personal mtge is with them) but haven't reached out to other banks yet. I had a great convo with Republic witch put me down this path...well see where it ends up. Either way I won't be discouraged but may try to use BRRR with SFH to build up a capital base and then move into the multi family side. I just see the value of scale on the multifamily side so its tough to remain patient as capital accumulates.
This is only my second deal so i don't want to pursue a syndication until i have more of a track record. I really like your idea on hard money lenders. Once I actually have a deal on the table I will for sure look into that funding source, atleast for S/T capital.
Unfortunately my schedule is locked today so i cant attend the KREIA event, but i will be at your event next week. I really appreciate your feedback and look forward to connecting in person.