I am in the preliminary stages of looking at a 5-unit complex. One of the things I need to find is the type of financing I can get on such a property. Is it commercial (being >4, I would think so)? I can get it for about $50,000, but can I get a loan for this type of property for this amount (or, probably less → 80%=$40,000)? Thanks!
yes, its a commerical loan. The tough part will be its a very small one. I would head straight to your local Mom and Pop bank and see if they’ll do it. That’s you best option.
There are some lenders that will do up to 6 family properties and not consider it commercial. Check out Delta Funding
yes, its a commerical loan. The tough part will be its a very small one. I would head straight to your local Mom and Pop bank and see if they’ll do it. That’s you best option.
Unfortunately, the property is located out of state, so I’m not sure a ma-n-pa operation will do. BTW, what are these ma-n-pa banks people talk about? All I ever see is BofA, Wachovia, Chase, etc., in my area.
There are some lenders that will do up to 6 family properties and not consider it commercial. Check out Delta Funding
Thanks, I’ll check’em out.
Ronsam4, you may want to do a little more research. All major lenders will classify any property greater than 4 units as a commercial property. These are not guidelines that the individual Lender decides. They are Fannie and Freddie guidelines.
Most lenders, including Delta, sell their notes. I am sure that there are not many investors who would want an albatross note like that one.
Ma & Pa banks is another term for community bank. Typically a smaller bank that is headquartered in your area of interest. Wachovia and Bank of America are large regional/national bank chains and their offices in your area are simply branches. When you apply for a loan with them they may not be making the funding decision locally or their decision is driven by factors other than serving the local community. By working with a local community bank you often talk with the decision makers and they care about the local economy. The website below is useful for locating the headquarters of any bank by name, location or size. Just look at the asset size of each bank in the resulting list and you can determine just how community oriented they might be.
Hmm, posted this earlier but it seems to have disappeared from the thread.
Lenders classify their loans based upon the underlying security property; single family (1-4 units), multi-family (5+ units) and commercial RE (strip centers etc.) This is mandated by the government regulatory agencies and is standardized across the country.
I wanted to revisit this thread to ask an addendum question … Is it possible to get commercial financing on MULTIPLE properties such that the amount owed is >$50k? I guess I’m trying to get secured financing on these types of properties, instead of getting unsecured financing and losing out on some of the perks.
Im sticking to my sugestion, Delta has done 6 unit properties as residential in the past. Now it is delta funding so the rate is not great but they can get it done.
Thanks Ron. I sent them an email asking for more information about my specific situation. We’ll see what happens.
I think the answer is yes. I considered to do this once and discussed it with my loan broker at the time. The catch is you will have to sell the properties together or refi it you want to sell one out of the package. Thus it limits your flexibility. With that said, in hind sight I kind of wish I had gone that route as I ended up paying for 3 loans, signing 3 set of documents, etc. (that was a real hassle).