I am looking at purchasing a 10plex and with the housing market at a low point, I was able to find one that I could make a deal on with a decent profit.

Unfortunately, everyone that I have contacted so far has mentioned a 30 year with the first 5 years being fixed and the last 25 being an ARM. Are there any other options to purchase this property? Seller will not finance.

MY situation: I have a little over an 800 FICO and enough money for a down payment but I would prefer not to use my own money if I don't have to. I have been employed as an executive protection specialist for over a year now and prior to that, I spent 7 years in Law Enforcement.

I spoke to a mortgage lender in my area and they started asking about my work history and credit score. I thought that I read somewhere that if you buy a property with 5 or more units there is no need for either of the above. Also, the owners of the properties want me to make an offer without seeing the last 2 years P and Ls or the rent rolls. Is this normal to not give out this information to prospective buyers?

My last resort is to go after hard money at a rate of 10% interest or more through some Venture Capitalists that I know.

Thank you in advance for your advice and recommendations.

Ray

Hi Ray,
I am a Multifamily (apartment) Loan broker. You are correct that lenders will mainly want to know about the property itself and it's ability to generate enough cash to pay back the loan, but they will still want to know that you personally are a good credit risk. They will want to know about the property's historical income and expenses (P&L), vacancy rate, rent roll, deferred maintenance, maintenance history, etc. And also about your credit and often income history.

If you have a down payment and a solid property that cash flows well I would not recommend a hard money loan. The costs and interest rates are higher than conventional loans and they are usually only for a max of 3yrs. Hard money is a short term solution and it sounds like you are looking for a long term loan. Don't get me wrong, there are times when hard money is a great solution, but it doesn't sound like it in your case.

Your FICO score of over 800 probably means you don't have late payments, foreclosures, BK's, etc. in your history and that is the first cut for many lenders.

There are commonly available hybrid and balloon loans available that are fixed for 3, 5, 7, 10 years fixed and amortized for 20 to 30 years. There are also fully amortized loans for 15 and 30 years. Of course there are others but these are the common ones. I would strongly recommend talking to a someone who does commercial loans only and not a residential loan broker. The loans are underwritten very differently and it's important to know how a commercial loan is underwritten to save "brain damage". Multifamily of 5 units and up is considered a commercial property for loans, insurance, common practices, and for many laws.

You mentioned that the owners will not give you historical P&L's without an offer. Some owners for whatever reason want to keep this information private. Although it's not the norm, this does happen and may not really be a big deal. You can easily protect yourself by making your offer contingent on your review of the P&L's. Review them carefully before removing the contingency! Make sure they are reasonable.

Having a down payment like you do is also crucial for most investments. It sounds like you are ready to go. Please let me know if you have any questions.