Financing a 4-plex unit

Like alot of people here, i am new to the rental property scene. I bought a house about 9 months ago, fixed it up, refinance most of my credit card debt and rented the house out and the tennants take care of all my bills except my boat and truck loan.

Qustion is:

I found a 4-plex unit that they want 200,000 for. How hard is it going to be to get financing on this with no money down? I currently take home about $2200 a month and have about $800 a month in bills (Not including my rental property cash flow or bills). Ive figured out already that it will cost me about $1800-1900 a month after P&I, insurance, taxes and Paid water. Each unit is rented out at $625 per month for a total of $2500 and leaving me with about $500-$600 a month left over. I had a 678 credit score, before i refinanced $20,000 in CC debt so that should bump my credit score up alot.

Does anybody have any suggestions, comments, or concerns as to what i should do or try? Thanks

There are 100% financing loans out there. They are structured at 70/30. This will give you a “blended” rate of about 6.9% / 7.8%. I’m in the same boat and have found 2 lenders that have a pretty good deal. Try EZ-Funds and Charter financial for 100% Financing. I’m still shopping rates myself.

You should see your credit rebound very shortly. At your credit score you should be able to get 100% financing. At a 678 fannie mae will do an 80/20. GMAC might be an option to look at also. You should find yourself a decent mortgage broker they should be able to put this loan together for you easily. 100% financing on a 4 family investment tends to spit back slightly higher rates. Take a look at an option arm or an adjustable interest only.

Thanks everyone. i did apply and was approved for 95% of the appraised value for a 5ARM 80/20 this weekend. Since the complex appraises at about 250,000 and im buying it for around 200,000 i should be good to go. What kind of interest rate am i looking at? Besides P& I i am going to have about $600 a month for taxes, insurance, water and sewer. So my mortgage payment cant be higher than $1400 a month so that i stay right around $2000 a month. The units rent out at $625 per month for a total of $2500 per month leaving me with $500 left over for any repairs and maintenence that my be needed. Thanks again

Ok, now theres a problem. I was preaproved, but at an 8.5% interest rate. I think this is way too high. What does everyone else think. I was thinking it should be around 7-7.5%. By making the interest rate 8.5% that is adding an extra 125-150 dollars a month to my payment. Any suggestions. Can i negotiate this without paying more upfront?

I’m not suprised you were approved for 95% and not 100%. Most lenders, when you finance a 3-4 unit investment property will hit the maximum LTV/ CLTV that you can borrow.

Is the 8.5% rate a single loan to 95% with no PMI? If so, that may not be a bad deal. Are you able to document your income? There are many factors that can lead to a higher rate- 4 unit property, stated income, investment property, 95% financing being a few of them.

You aslo have the option of buying down the rate. I would keep looking a good LO will find you the financing you need with your credit scores.

Way to Go! See if you can get an ARM for this deal. I think the 8.5 is a little high with your score. since this is a rental unit you can rest easy with the ARM and not be skittish the way some people are with ARMs when it is on their primary residence.

Are the units already rented?

Good Luck To You.

Why not buy the units with a mortgage that does not have a prepayment penalty? Then very shortly refinance using appraised value. Although you would pay double closing costs, your ltv would be about 80% which should get you a rate of about 6.75% with no mortgage insurance

With a traditional mortgage, look out for seasioning issues, usually 6 months- 1 year in order to refinance using appraised value vs. sales price.

Would doing a interest only loan be a good idea on a 4 plex like this? I figure i could be making $700 or $800 a month by doing this and then just pay some of that toward principal when all units are rented out. I know i would be able to sell the unit in 5 or 10 years and proably be able to make $20,000 plus off of it. I am new to this kind of stuff and heard interest - only loans can be good or be a very bad idea. just wondering some opinions here. Really want the complex, but the way it is working out right now, im not going to be able to swing it.