Am I making a mistake?

I am in the process of seeing how much I can qualify for on my first multi-family investment. Possibly a 4 or 6 unit building.

I am trying to figure out if using a hard money lender to loan me the down payment is a mistake or should I be looking for a private individual lender.

I do not know of any private individuals.

I am trying to do this deal with zero down out of my pocket.

Any advice would be greatly appreciated.

Thanks in advance

I think this falls into the category of " If you have to ask …" I would suggest you initially learn the ropes on smaller projects and after a few of those, the questions you have now for multi financing will probably have answers.

My two cents,


4 unit is residential and 6 unit is commercial - big difference. If you are a full doc borrower with good credit you can still do a 100% loan on a 4 unit. I would stay away from commercial until you have a few deals under your belt.

Commercial is for experienced investors and is nothing to play around with.

I agree stick to the 4plexs for a couple deals, if you have no money to invest try to find a partner that does. You are going to have a harder time finding property if you are trying to finance the entire amount. You’ll need to make sure you have enough cash flow to cover your debt service (which includes the hard money) if you have no money saved/no investment budget your personal income is going to have to cover the monthly cost of the property during your holding period and this might bury you. Be careful!

I have a question to add to this… I do have a few smaller deals under my belt and I am considering going commercial. My question is (I know there are a lot of variables but I am looking for an “in general” answer):

Is it better to continue to buy 2-4 families or join a 5-10 person investment group and go commercial???

You can not get a loan for your down payment from a hard money lender. That is the exact opposite of what they do.

As for joining a 5-10 person group, I would be very apprehensive to have that many cooks in the kitchen. Being a partner in a larger group just adds a whole new level of complication to your life.

Your best bet is to start a relationship with a bank that does commercial lending.

What I did was to move a large chunk of cash I received from the sale of a property to a bank that handles commercial loans. HOW you DO this it is very important.

The mistake MOST people make is they go to a commercial bank and ASK for money…WRONG…You might as well go in there as say “I don’t know what I’m doing”

Instead try this approach. Ever hear the saying “You only have ONE chance to make a first impression???” GOOD remember that.
Find out who handles commercial and business lending, DO NOT give your name to ANYONE. Get a contact name and number. Then have your wife/girlfriend (make sure she’s sharp) called Mr. Big and set an appointment. Have her explain that you are considering making a large deposit at their instituation and you want to discuss a long term relationship. This large deposit could come right after you close on the sale of your next flip, use THAT timing to YOUR advantage. Make sure you have some good questions for this guy when you go in. DO NOT act like he’s helping YOU. YOU are there to see if HIS bank has what it takes to do business with YOU. Tell him that in those words. It’s a physc. game, the banking business is VERY competitive. If he thinks he could lose you to a rival, his WIN instincts will kick in. Use it to your advantage.

Now, let’s remember a few things here. If you go in there with a credit score in the 500’s he’s gonna know you’re a stroker. If you don’t know common terminology your done. Having said that, if you go in and MAKE HIM win your business, that’s EXACTLY what he’ll try to do.

I did this years ago, I walked into this bank with a 6 figure check because MY previous bank instituted a “new policy” were they wouldn’t cash an out of state check, you had to deposit it first. This is trivial I know, but they had cashed these checks for years for me. I had well over $100,000 in their bank. One day a cashier says “sorry we won’t cash that” I explained that they had cashed about 200 of them over a multi year period. Another NO!! was what I got. OK then, Miss, can you tell me EXACTLY how much is in that account, to the penny? Sir, you have $XXX,XXX.XX in that account.
Great!! Make me out a cashiers check for that exact amount!!!
Well, managers were called, people asked if I had a problem? No, give me my money, NO PROBLEM. Took the check, walked ACROSS THE STREET, told the manager how I came to have 6 figures in his competitors bank and further explained that I wasn’t sure if HIS bank’s service was any better! That’s when the clouds parted. He sat there and went over EVERY advantage his bank could give me over my old bank. Things I never even knew. He set up a commercial lending account, checking, line of credit, everything. To this day he is STILL my go to at that bank. He’s moved way up since then, and so have I. If I hadn’t been so pissed off I would have NEVER gone in there with that attitude. But it worked all out!!!


A fellow member on this board who appears to be very proficient regarding this topic provided me with a solution to a similar pitfall. He suggested one to use a hard money lender for the reasons mentioned below:

-Will force you to buy only great deals (saves you from destroying yourself)
-Will do 100%
-Will give you money for repairs/updates
-Will pay the closing costs (roll them into the payments)
-Some will even roll in 3-6 months of the first mortgage

After the rehab/updating or whatever is complete then refy with a traditional lender at a better rate/terms. Since you’ll be refinancing at (to be smart) around 70%, no down payment will be needed and you end up with around 30% in equity.

Example (given to me):

Appraised value: $1,000,000
Purchase price: $500,000
Rehab: $100,000
Closing costs at 6%: 36,000
6 months of Mortgage Payments at 14% amort. 30yrs: $45,210
TOTAL LOAN: $681,210

Refinance 6 months later with a traditional lender at 70% LTV which will also cover the refy’s closing costs (3% of $680,000 approx. $20,000 = $700,000). You’ve just bought a commercial property using $0 of your own dollars.

*This was an example given to me. I have not tried such a method, nor am I saying that it is a fool proof way to purchase properties with no money down. This was simply advice given to me that I am passing on to you. However, if someone wishes to confirm or refute this method please feel free.

That’s why your name must be “joker” b/c this is a joke.

Commercial is for anyone. Don’t listen to these folks… if you believe you can do it, then do it. F*ck what these naysayers say… B/c that’s all they say… NAY…

Like Trump said… what’s the difference b/w a house and a skyscraper? Nothing, really. You buy it, rent it out. Financing might be trickier but hey… the principles are the same.

I am not saying commercial is on the same level as residential. All I’m saying is… dream big. Why not, right? If you go broke on a $100m deal vs. a $100k deal, you can at least say you REALLY went for it.