Profile picture for pgal

financing a 6 unit apt bldg.

Hi,
I currently own and occupy a duplex and am interested in purchasing a 6 unit apt building. This is in California.

My questions are:
1. Can I buy with less than 20% down when buying a 6 unit bldg?
2. If so, can I do a first and second mortgage to bypass PMI?

Thanks,
Patricia
  • November 19 2007 - US
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Answers (13)

Find a broker who does small commercial loans. Some brokers also originate Fanni Mae Multifamily loans, but they are rare.

I am not sure but I don't think PMI is going to apply to a 6 unit loan. The 4 plex may be where that sort of underwiting and insurance ends.

Also talk to your bank. If you are strong and experienced in Prop Mgmt, they may help you.
  • November 19 2007
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Profile picture for pgal
Thanks for your info - much appreciated.
  • November 19 2007
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Washington Federal (I think they have branches in CA) may be your best bet. The income your property generates will determine if they will allow for 10% down.

Good luck.
  • November 19 2007
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pgal

I am an experienced Residential And Commercial Lender. A Key point that you Need to be aware of with units is that it is a Completely different animal when compared to residential lending.

The Key difference is that in residential everything hinges on both the borrower and his ability to repay in addition to the property.

Anytime you have Over Four Units it is Considered Commercial Lending. The client is looked at on his own merit;ie,credit history. However the Main feature in Commercial Lending is Debt Service. What this means to you is that regardless of how much You want to put down...the Loan Amount Will be determined by the debt service. So in the case of units, there is a complex set of analysis taking into account monthly rents, vacancy, and expenses.

Basically what I am trying to say is that Depending on the Sales price, monthly rents, and expenses...the Lender could Require Much more down than you are anticipating.

Comtact a Competent Commercial Lender. If you need advice, please refer to my profile for contact information. or visit me at http://ocmortgagefinder.com/index/htm

I service California Only

Best Regards
  • November 19 2007
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pgal

I'll try this once more- not sure why zillow is not forwarding this correctly to the board- if not just check my profile for my info and web address-- Or a Competent Commercial Lender

Here goes http://ocmortgagefinder.com/index.htm

Best Regards
  • November 19 2007
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Yes, residential and commercial are different. There won't be PMI with commercial loans. Tyipcally, commercial loans require 25% down. There are a few Lenders that will allow less than 25% down, but the building needs to have GREAT cashflow. The price of the building should be based on the income and expenses. Don't get caught up in Pro-Forma numbers and 'possible' future value and 'possible' rent increases. If rents go down, so does the value/price of the building. And not to be toooo pessimistic, but most sellers lie about actual collected rent and expenses. Ask for Schedule E's, P&lLs and utilities bills and make sure they match the monthly P&L's.
  • November 19 2007
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Michael And pgal

Any commercial lender will Certainly ask for Rent Rolls as well asdetailed information of expenses. Again this will determine the loan amount. 25% down is Not always a rule of thumb.

Bottom line the loan amount is Based on Debt Service.
  • November 19 2007
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Wayne what about all these new guys that claim to use a "residential model" for small commmercial. I haven't been slow enough to delve in to this arena. But they claim it is about "property value" and "credit history". I may off base, this 6 unit bldg in Cali could be 3 million bucks, which may not be a small commercial loan, to them.
I am going to email a rate sheet I got today from one of them. If you have a chance evaluate it. Post your comments. If I ever come back here I would love to know what you think about their rates and LTV's. This place has killed my interest in life.
  • November 19 2007
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Hamp

Don't let things get to you- I hope that you were joking. You are one of the Good ones on this board. I know we all have other things to do like make a living, but you would be missed.

As Forum members we All need to try to keep everyone on track for what this board was intended for and help to Rid of the one's Exploiting it.

Regards
  • November 20 2007
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Profile picture for ELender
Like some of the others have said this is definitely commercial. Some banks will surprise you if the debt service will cover the mortage. I've seen countless properties go to 90% financing if the debt service lined up...

There is no MI for a loan like this. I have several multi-family units I own here in Florida but I have always kept to the 4 unit maximum where you can go by Fannie/Freddie requirements.
  • November 20 2007
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Wayne,
Do you have a WAFED in your area? They do this type of financing here in WA and we broker to them for the type of property specified above. That is the reason for offering it up.

You probably have the resources in place but you may want to check them out if they are there.

Regards
  • November 20 2007
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Profile picture for Helpu2
Actually, there is a bank that will underwrite this just like residential. They will use your personal income, and the rents as stated on the appraisal. There are no DSR requirements. Be prepared for a 25% downpayment.
  • November 21 2007
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Happy Thanksgiving to those who celebrate.
  • November 22 2007
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