Maspeth, NY · Member since 2013 · 58 posts · 16 votes
I want to start out and say i have never acquired a multi family property but I am eager to purchase my first multi family property. At this time I own a mixed use property, duplexes and single family homes. After many hours of research and looking into financing options I found a lender (Crefcoa) that underwrites Freddie Mac multifamily loans. The goal is to find multi family property which I can purchase with 20% down .
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
9y
Regarding "If I own part of a mixed use building and my portion exceeds the the loan amount I should have no issues with attaining financing ?" The 'rule' is based on net worth. So your tangible assets minus liabilities... and I believe the formula excludes your personal residence.
If you hold a lot in an LLC, then you can use the L-1 Balance Sheet (or your K-1 capital portion if multi-member) from your 1065 to assist in the net worth 'test'. But here's the rub. The L-1 is based on the company property basis, not on current market value. So a commercial lender's PFS (Personal Financial Statement) that has with your current portion (e.g. if you own 40% of the LLC) of the current market value of the LLCs assets may be a more important (and larger) figure. I don't know enough about the Fannie Mae MF lending process to know if the applicant provides balance sheet information on basis (which I think is GAAP, what an auditor would want) vs. current market value, which is what my commercial bank would generally use on a PFS.
Regardless... if you want to borrow $1M, which is the GSE MF minimum, then your borrowers (you and anyone else buying) need a combined $1M in net worth. If it is you solo doing the borrowing, then (by definition) you would need to be an accredited investor.
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
9y
It's a good program, as is the Fannie Mae comparable small MF program. The net worth requirement trips up some people. "Collective net worth of key principals must exceed loan amount" which is also like the FNMA program.
Lender · Houston, TX · Member since 2017 · 171 posts · 21 votes
9y
@Christian PodedwornyBoth Freddie Mac and Fannie Mae have small loan programs. The Freddie Mac Small Balance Loan Program, mentioned above is a great program that offers longer term fixed rate loans from $1 million to $6 million (up to $7.5 million for properties with 75 units or less). You can fix a rate for 5, 7 or 10 years on a 30-year amortization schedule. You can get up to 80% LTV on Top and Standard markets. Both programs are non-recourse.
PM me if you want more details. Also, I have written a short article with tips on how first-timers can prepare to present their loan request to lenders. PM me if you want to review it.
As for net worth and liquidity requirements, we require a net worth equal to the loan amount and post-closing liquidity equal to nine months of P&I payments. As @Chris Martin mentioned, this can be a combined net worth and post-closing liquidity between 2 or more sponsors.
Maspeth, NY · Member since 2013 · 58 posts · 16 votes
9y
thank you for the update and I would like to see your article.
If I own part of a mixed use building and my portion exceeds the the loan amount I should have no issues with attaining financing ?
Another question I have is regarding credit score and credit card loans. At this point I have over $40,000 in 0 % interest credit cards that I used to buy properties for cash and this is what comes up in my credit report once mortgage brokers look into my financial status.
At the moment my credit score is over 660 now and I would like to know if the credit card & credit score would impact my loan with Freddie Mac ?
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
9y
Regarding "If I own part of a mixed use building and my portion exceeds the the loan amount I should have no issues with attaining financing ?" The 'rule' is based on net worth. So your tangible assets minus liabilities... and I believe the formula excludes your personal residence.
If you hold a lot in an LLC, then you can use the L-1 Balance Sheet (or your K-1 capital portion if multi-member) from your 1065 to assist in the net worth 'test'. But here's the rub. The L-1 is based on the company property basis, not on current market value. So a commercial lender's PFS (Personal Financial Statement) that has with your current portion (e.g. if you own 40% of the LLC) of the current market value of the LLCs assets may be a more important (and larger) figure. I don't know enough about the Fannie Mae MF lending process to know if the applicant provides balance sheet information on basis (which I think is GAAP, what an auditor would want) vs. current market value, which is what my commercial bank would generally use on a PFS.
Regardless... if you want to borrow $1M, which is the GSE MF minimum, then your borrowers (you and anyone else buying) need a combined $1M in net worth. If it is you solo doing the borrowing, then (by definition) you would need to be an accredited investor.