Profile picture for zandall

Looking to buy a 6 family

I already own an investment property and was curious to know what are my options for buying a 6 family building? What loan options/rate/anything someone could tell me would be helpful.

Thanks
  • March 01 2009 - Saint Louis
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Answers (7)

Profile picture for zandall
Nathan

I might consider converting them to condos at a later point, but not in this market. I have no interest in changing this building to anything but a six family. Thanks for all the ideas and options you presented though. There are numerous possibilites with the property which is why I want to buy it.

If I go with a commercial loan can the rental income be credited as income?
  • March 02 2009
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Profile picture for natewolf


If you own your other investment property (own, as in, no mortgage/financing), you could seek a general business loan or portfolio loan and get financing on both properties as a group.


Ultimately it depends on your credit situation, and the amount of verifiable income the properties produce. It also depends on what you intend to do with the 6-family property. There are special programs for low income housing if that's an option for your project. If you intend to sell the units individually, you could seek a redevelopment loan. Often there are tax benefits for these as well.


So not only the type of property, but the purpose of the loan becomes an issue. It is possible that the seller could convert the property into a four-unit building and you could qualify for a residential loan instead of a commercial loan. This usually would entail removing all or part of a kitchen. Ultimately if it were converted back into six units would not usually affect your loan. But you should speak to your lender and also to your zoning department about this option because you don't want to do anything illegal-- but this is definitely an option.


If you will not live in the property, then the rates and terms on the residential or commercial loan options may not be significantly different. Local banks and savings&loans are generally better sources for commercial loans on products like this since they know their local markets and will usually hold the note themselves on something like this.


Why check with zoning if you're planning to convert/reconvert the number of units? Because some buildings which currently are grandfathered as multifamily would not be allowed to rebuild under current restrictions.
  • March 02 2009
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Profile picture for zandall

So what sort of terms and rates are associated with a commercial loan? Money down? Can you do an FHA commercial loan if you move into the property?

  • March 02 2009
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If you go over 4 units it's considered commercial. Most lenders will give you an adjustable rate 3/5/7 paying points.
  • March 02 2009
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Profile picture for shapiroamg

Commecial rates can vary greatly from lender to lender and from the local banks. Fixed rates are probably harder to find. Most rates are adjustables for 3, 5, or 7 years. Start with your local banks as they might be the source for rate/product information.

  • March 02 2009
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Profile picture for zandall
So there are no other options other than commercial? What sort of terms are associated with commercial loans?
  • March 02 2009
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Buildings over 4 families (5+ units) is considered commercial. You will need to find a commercial lender for this.
Expect the terms and the lending process to be even tighter than residential. Probably good to see your local savings and loan.
  • March 02 2009
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