8 Unit Breakdown: Lender’s Perspective

[Daniel Adu-Boateng]

*Disclaimer: In order to protect my clients I will not be putting the Address of the property on here. I will also not be listing exact purchase price, but these numbers will copy the exact same structure that was quoted. The results and pricing are the same.

This buyer was looking to buy an 8 Unit Property, with some seller Financing included in the deal as second position. These are not always easy to do with a DSCR loan.

-Purchase Price: $620K

-Seller would finance: $370K (In Second Position)

-Lender would finance: $250K

-Down payment: Out of the $250K, buyer was asked to put down 10% of the purchase price ($62K)

-Loan amount or balance for the lender to finance is now: $188K (In First Position)

-Leverage was at 90% CLTV (Combined Loan to Value)

-5 points

-30 year term

-9.24% rate (Principal and interest, not interest only)

- 5-4-3-2-1 Prepayment penalty

Final thoughts: The buyer ended up walking away from this loan, which is fine. Before the buyer had started talking to us, I believe they were looking at a 25-30% down Payment. So I believed with 10% down payment, we were saving them a lot. Even with the closing costs of 5 points. I was a little bit surprised by the leverage from the Lender, but they took into account the buyer's experience. This buyer had more than 15 doors, and over 20 years experience as a landlord. If they were willing to do just a regular DSCR Loan, which is much easier to close. We would have been at 25% down payment as well and the points would have been lower.