I currently own 2 duplexes with significant equity. Owned both for 5 years bought one with FHA and the second was a 5 year ARM that I recently just refinanced to a 30 yr. I was able to get a sizable heloc line for the equity.
In the upstate NY area. So not a HCOL area compared to a lot of markets.
I want to leverage into a larger property. I would love to try to get something in the commercial size 5+ units that is.
Anyone got some suggestions on how to go about this? I figure I have 20% down for a loan up to 1 million. Not saying I want to spend it all or get a property at that price point. But what are my options for financing. I want to also try to see if I can approach local owners to see if they may be interested in either doing an off market deal. Or if they would be interested in seller financing to make it a win for both parties. I figure either way I’m saving on realtor fees. And I can find creative ways to finance a sale.
My personal goal is monthly revenue being 1% of purchase price. And 400-500 per door cashflow monthly is a solid win in any property I get.
What would you do? What kind of financing is available for commercial? I’m doing my homework but I want to buy as soon as possible.
Posted by frostymystic
3 Comments
I’d keep adding duplexes. Benefits of commercial are wildly overblown. You don’t really get much better economies of scale, lending requirements and reporting are really strict (you won’t get 80% LTV) and exits are harder.
You’re looking at probably 60% LTV and having to report financials annually to meet DSCR and if you miss on numbers you’re in default and will have to add cash to get to ratio. Not a lot of room for error even with 40% down in today’s market in my experience. I did what you’re planning and I wish I would have scaled up with smaller deals.
Spend a few of the dollars you were gonna spend anyway, on outreach or building inbound leads. Leverage sellers in a bind to grow your portfolio faster; subject to’s, probate, auctions, etc.