24 Unit Apartment Building
I am looking into a 24 unit apartment building for sale in my city. I have yet to see the numbers on it but it is priced at what most 12 unit apartment buildings are going for in my area. My question is I have very little money down and want to get financing lined up as soon as possible so in case the numbers do make sense I can jump on it right away. What should be my first step in finding financing if I could even get financed with only 5-10% down?????
See if the owner will take back a second mortgage. Then get financing for the 70%. Generally for commercial properties the financing companies will want 30% in the property.
If you havent already done so, start working your credit as well. There are double the financing options in a commercial deal for a 650 versus a 600, and double that number for a 700 over a 650.
Dont forget that for a traditional good interest loan, Joel is correct you will need 30% down on the property. So if you only have 5-10% down, you are looking at Hard money, Partnering, or getting really creative with the rest of that 30 percentage.
Dont forget that you may need to pay for an appraisal, environmental etc etc and that is why it will cost you the 30%.
In the lenders section of the website you will see what they are offering based on your credit score, at a glance. You should call them and see what other programs they have for your credit score and property type and dollar amount.
Good Luck,
Kyle
You should absolutely have the owner take back some financing. Buyers are starting to pick and choose the terms of the deal. Don't forget to utilize the rental income as part of your income to qualify for the loan. Some lenders will go as high as 75-95% on the rents.
I have a similar situation, a 15% down instead of the usual traditional 30% for a 7 plex in Portland.
What I am getting here is that a few lenders are willing to do 20% down, including US Bank. Also, most institutional lenders here are looking at the ratio of net (monthly) income to the monthly payments (PI) to be 1.2.
In my situation, the rents are low, which is good for residential but lousy for commercial loans. Commercial lenders can just look at the P & L statements and tell you if they can lend to you or not.
I have talked to a couple of private lenders by talking to who is advertising in the paper and advertising, and I came up with one that would do a blanket mortgage that includes a 2nd on my home, also a hard money lender that will lend at 11% and 3-10 points. Some of these lenders want comps, some want appraisals.
Commercial properties seem to be more valuated on the rents. I am in the process of wondering whether to complete the deal or go to the low down residential market with my low down 60K. Good luck. Anyone have any more comments I am all ears. [ Edited by thebestever on Date 09/17/2004 ]
I would be very curious why the price seems to be that of a 12 unit complex. There must be something wrong with the picture. Also, once you look at all of the #'s based on only 10% down you would probably not have very strong cashflow. My advice would be to look for a fourplex (4-units) so that you can do conventional financing with 5 or 10%. I hope that I am wrong and that you are in for a really good deal. If that is the case maybe you could get someone to partner with you.
Good Luck!!!
Aron
Looking for Texas lender for 6 units. Any referrals?
I posted a similar question with no response yet; if the seller takes back a second, will the bank frown upon that? I assume the bank will want to know the terms of the second. True?
The purpose of seller seconds or seller carrybacks is to limit your out of pocket expenses as a buyer. I always tell people to find a lender who plays your way and yes the lender will have to be notified of the seller second for it should be on your contract anyhow - it is not frowned upon.