Purchasing As A Business Or As An Individual
I'm trying to purchase an apt. building through a business. My realtor told me that I need to put 20% down, not the 5% I had assumed. The realtor told me that for any property that is 4 units or more, the banks require a 20% down payment.
I said I wasn't too sure about that rule, but I just wanted to get your advice.
Thanks
Different lenders have different rules Shop around!
Yes, 20% down is the rule in commercial property-- Including apartment buildings of more than 4 units. This is why commercial real estate is more creative than residential. Now you must explain to the seller that you need a 25% second or some other creative mechanism to get your deal done.
In the case of asking the seller for this 25% option, what impact does this have on the 20% required by the bank? Are you saying that at closing, the seller hands over the 25% and this goes towards the down payment?
You got it. Adds up to 105% right? You may not find a lender willing to do that deal but its a lot easier than finding one willing to let you buy with only 5 % down.
While 20% is the rule, what the 1st mortgage holder really wants on a multi-family is no more than 80% on the first mortgage.
Yet I've placed plenty of multifamily loans with a seller second that takes the LTV up to 90%, or 10% down.
So, 10% skin in the game from the buyer, no more than 80% first mortgage, balance held by seller on a multifamily (5+ units).
This all assumes the property supports the debt.
I just closed on a four unit building with only 10% down and no mortgage insurance. Of course the rate was much higher but it is still going to have a decent cash flow.
I just closed on a four unit building with only 10% down and no mortgage insurance. Of course the rate was much higher but it is still going to have a decent cash flow.