Second, commercial financing requires an additional 10% of the loan amount as reserves and averages two points a loan.
Try a 4-plex or a duplex. You need far more capital for commercial financing.
What needs to happen is the following:
1. you need to wrok with a good mortgage broerk who is familair with "commercial" lending. He/she will pre qualify you
2. At the same time you need to work with a real estate broker who can actually do the investment numbers and comparison for you and ask questions like: Why did you decide on a five unit building?
You can make an NO OBLIGATION appointment with me to discuss invevstments.
You will need a 25% down payment ..Minimum
We require a minimum debt coverage ratio value of 1.20 to procure a loan for income producing properties.
example; if the 5 unit has a net operating income of $24,000 and an annual debt service of $20,000. The Debt Coverage Ratio (DCR) for this property would be equal to 1.20. This means that it would generate 20% more annual net operating income than is required to cover the annual mortgage payment amount.
I hope this helps.
Senior Loan Consultant
By Referral Only
All California Mortgage, Inc
P: (415) 464-8261
C: (415) 378-7508
F: (415) 464-2367
I can see you did not take any advice from my last posting. You can talk to a Realtor who is familiar with commercial multi unti investments, and he/she can give you mortgage brokers/bankers they work with so you are at least talking to the right people from a mortgage perspective. You should also speak to an agent who is familair with purchasing multi unit ( more than 4) properties, as that is very differnt from reguyalr residential sales. As an investment advisor, I know I can assist with that.
For future reference when you get to the point that you are ready to buy commercial property, here's a handy url that you can go to and get answers regarding commercial financing etc.
With 1-4 units you can purchase property with less than 20% down but it will have to be owner occupied. Oakland have a lot of multi-units property that is still affordable. My investors love Oakland -) because of the price and the rent is high.
Good luck on your purchase and if you need help in the future, let me know.
Prudential CA Realty
This is a one active community; Thanks for all that answered the question!
From what I gathered I might need god to come down and finance a 5+ unit if
I donâ€™t have enough capital ( most say about 20% ) not to mention that the monthly rent income needs to be 125% of the mortgage + some reserve ( sounds like about another 10% ).
If I have not summed the answers correctly please correct me,
Will focus on 2-4 units for now, Thank You
Incomes are from $33K to $71K per year.
An excellent lender and author is Paul Laterza with Mortgage California. Call 925.639.1112 for details of what can be done.
Referring Realtor is Menelva Boyd with PBG Real Estate 510.375.4288.
96.5 % financing if one unit will be occupied by the borrower (Owner Occupied Property)
680 credit score is sufiscient
Income for units that are not occupied by borrower is based on lesser of disclosed existing leases or appraisers estimate market rentâ€“ minus 15% vacancy factor (in CA)
What you are looking for is do able in Oakland, But you will have to go thru many hoops and you will not be living in a high class area based on what you want to pay for all these units. You are a good client for an FHA loan based on your down payment size. I would recommend starting with a loan broker so he can evaluate your financial strength. He can give you a pre-qual letter. which you will need when you put an offer in on a house. I know of a few good loan brokers if you are interested