I’m looking at a couple properties on the MLS, and in talking with lenders, on a 4 plex, they are asking for 25% down. I’m starting to believe a few of these MLS 4-plexes will be on the market for a while because who has the cash to buy a few of those at that percentage down?
Wow.
Unfortunately that is where the market is right now. Unless you plan on living in one of the units 25% is what you will have to put down.
That’s what I had to put down for my 6-unit. When I approached my small local bank about a duplex, they said the same thing. After some negotiation, they said I could get in it with 10% down. I’ll have to wait until I get back on US soil before I make a move, but it should still be there for what they’re asking (I’m not going to offer anywhere near asking price). That upfront cost takes a lot of would-be buyers out of the market. At least a small bank can flex a little. Try that with super jumbo bank with 10 different programs (all of which want you to have 25% down).
I found a company in SC that is giving me 85% LTV. And got owner financing on another at 10%.
it definitely is not a conventional lender offering that type of loan. It must be a local or state bank.
I am in SC. Care to share the name of this lender?
Good advice. I’ll have to check with the smaller banks around here. The Ag banks should be doing well.
A word to the wise. You should always put at least 20% down when you are purchasing properties. I know some may not agree because they are heavy on leveraging. But I say put 20% down because you are buying down risk. Unless you are getting a brand new building with top tier tenants, you want to minimize your risk because things break, tenants move out, or refuse to pay rent. Then your stuck paying out more money than is coming in. Example: back in 2006, I purchased a 16 unit apartment complex for $350,000. I put my 20% down which was $75,000 and financed $275,000 for 30 years. Needless to say, I hit some rocky roads with major repairs and a few deadbeat tenants. But had i not had such a low mortgage and expenses, the costs would have eaten me alive. Now almost three years later, I bring enough money that I quit my full-time job and am in the process of starting a property management company. I mean, truly what is the ultimate goal of real estate investing? to quit my day job when I am 65 years old or when I am young enough to enjoy things now?
I coudn’t agree more with ismith2020.
Unfortunetly the church of no money down has a very strong hold on people. They focus to much on getting the property instead not keeping it for a long time. You buy the place one time. But you will find you own it once a month for as long as you have it. I would much rather pay up front and and have a fat pay day every month than the other way around.
I think there is another way to accomplish the low LTV type scenario without putting down 20% each time. And that is by buying way below market value. Because in the end it all comes down to the loan amount. If you do 100% financing on the loan amount of $275,000 or 80% financing on $350,000 the numbers will be the same. Well the rate may be a bit different but if you compare them as apple to apples they are exactly the same. And by using creative financing to acquire the property you still have cash in the bank in case of emergency. It can take someone a long time to save of 20% each time they want to buy a property. But finding a property way below value and financing it can happen every day.
Don’t confuse working hard with working smart.
The last conversation I had with a lender a couple of weeks ago stated that they wanted to see skin in the game regardless of anything else. I am looking at a deal that started at $895,000 then went to $700,000. I told the lender that if I could get it for $495,000 I would like to purchase it. The owner committed to takeing back a 20% second mortgage, witch would create a 1st of 396,000. The lender still wants 10% cash down from me even though the dscr is 1.3 at these numbers. I have herd from more than a few lenders that the easiest way to get a loan to default is to lend on no money downs.
I am not considering the hard money lenders simply due to the high cost of obtaining the loan then the high interest rates witch create the same problem of lack of net net in your pocket cash flow. I am also speaking of commercial loans only. I understand that 4 units and under are much more flexible.
I’ve heard the same thing from my bank regarding commercial loans. Even if I’m buying well below market value, they still want me to have a significant amount of my money in it. Their reasoning is that I won’t just give up and walk away if I have 10-25% in it up front.