Home Buying in San Ramon>Question Details

Mike, Other/Just Looking in Palo Alto, CA

How much down payment for purchase of four plexes?

Asked by Mike, Palo Alto, CA Wed Apr 20, 2011

If a four plex costs $650 - $1 million, what is the downpayment percentage? Most realtors only send listings consisting of condos and SFR, where is a good listing of fourplexes, duplexes and triplexes or small apt buildings in the bay area? Will the bank look at any of the rents as additional income? Are there homepath 4plexes?

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Thank you for catching my typo Gregorio, I guess I was typing too fast. It should have said 20-25% Down. I have an portfolio investor who will go up to 80% LTV on non-owner 1-4 units and of course 75% LTV for traditional Fannie/Freddie.
Web Reference: http://www.AFN-Loans.com
Web Reference: http://www.AFN-Loans.com
1 vote Thank Flag Link Thu Apr 21, 2011
Hi Mike,
A couple of the answers already mentioned FHA financing as a viable choice with the assumption that you will be owner occupied and that your loan will be within the loan limits for the county the property is located which definitely you should consider but more information from you would be needed.

As a clarification though regarding FHA financing and 3 to 4 units it's not the remaining units that must cover the mortgage payments it's all the units combined including the owner occupied one as well as if it will be rented even though it won't. Then it's either based off of the 90% rental factor or operating income statement from the appraisal.

Regardless of that, it goes to show you that for those who mentioned FHA financing as an alternative gave it some thought that it could be a possibility.

Best of luck to you.
0 votes Thank Flag Link Fri Apr 22, 2011
Hello Mike,
The norm is 25%. If you like, I can send you listings of multi family homes generating positive cash flow.
0 votes Thank Flag Link Thu Apr 21, 2011
p2 very true. Good to point it out its state specific. Since the question was asked in San Ramon I stuck to these guidelines. There are SO many now.
Web Reference: http://www.loansquawk.com
0 votes Thank Flag Link Thu Apr 21, 2011
BTW, Brian, Fannie is requiring borrowers for NOO properties in many other areas to also put down at least 25% (including areas outside CA).
0 votes Thank Flag Link Thu Apr 21, 2011
Hi Mike...

There are many scenarios around the situation due to the big difference in loan amounts. I would be happy to run specific scenarios across our investor guidelines.

General 4-plex requirements as a non-owner occupied conventional loan up to $801,950 per Fannie would require a down payment of 25% (IN CALIFORNIA).
Homepath above 2 units my guidelines read a 25% down payment.

As mentioned there are MANY variables with your question. I would be happy to provided you with a free analysis specific to you situation just shoot me a private message to get started.

Web Reference: http://www.loansquawk.com
Web Reference: http://www.loansquawk.com
0 votes Thank Flag Link Thu Apr 21, 2011
The 3.5% for FHA is true. You can finance a primary 1-4 residence for 1 mil in San Ramon with 3.5% down.

This statement:
"If you are going non-owner, you'll need 30-35% down depending on your financials."

... Is completely untrue. You can finance a 4 unit investment property with 25% down per Fannie/Freddie guidelines.
Web Reference: http://WeFixRates.Com
0 votes Thank Flag Link Thu Apr 21, 2011
Hello Mike,

It depends on if you are buying owner occupied. If that's the case you're in luck. The down payment on a FHA 1-4 unit property is a whopping 3.5%. The rents on the other 3 unit MUST cover the mortgage and the underwriter has the discretion to give you up to 90% rental factor without a 2 year landlord history like Fannie and Freddie require. The loan limits are as follows:

The maximum FHA loan limits for most Bay Area counties (the ceiling) by property size for fiscal year 2011 are as follows:

* One-Unit $ 729,750
* Two-Unit $ 934,200
* Three-Unit $ 1,129,250
* Four-Unit $ 1,403,400

If you are going non-owner, you'll need 30-35% down depending on your financials. Please let me know if I can be assistance.

Best of Luck!
Web Reference: http://www.AFN-Loans.com
0 votes Thank Flag Link Thu Apr 21, 2011
Actually, incorrect. Fannie Mae does NOT require a 2 year land lord history. That is an overlay very common with the big banks that filter down to the smaller companies. We have never required 2 year landlord history because we can sell direct to Fannie and Fannie does not require it. Not sure about Freddie since we are a Fannie house but most guidelines are usually the same for both of them
Flag Wed Oct 16, 2013
Your financial statement is part of your planning process. You must consider your net positive cash flow to make sure the deal makes sense. You can put the the amount of down payment the lender requires, but if you're still shelling out cash to cover your costs each month, it will not work for you in the long run.

Work with someone that can project flows, vacancy projections, expenses is recommended.
0 votes Thank Flag Link Thu Apr 21, 2011

We are currently in contract on a multi-unit building and were given the following guidelines:

1. Owner occupy - 25% down
2. Investment property - 35% down

However, keep in mind they do change a lot more than they used to. With regards to how lenders will view rents it depends upon the lender. With regards to what areas, we have recently seen a number of place in the east bay (oakland) area that make sense from a cash flow perspective.

I have a lot of experience in this both personally and for clients so if you want to talk and/or get some lender referrals we regularly work with my contact info is below:

Best Regards,

Lance King/Owner-Managing Broker
DRE# 01384425
0 votes Thank Flag Link Thu Apr 21, 2011
Hi Mike,
Great questions and as our industry creates new rules daily my best advise is to speak with a couple different lenders in the area. I can connect you with them if you like. We can also set you up on an automatic MLS search for multiple dwelling listings.
Please work closely with a realtor of your choice to stay current on inventory and lending options.
Good luck to you,
Suzanne Looker
0 votes Thank Flag Link Thu Apr 21, 2011
Mike ... there are currently 21 four-plexes listed in the East Bay mls between $650,000 and $1,200,000 including 4 in Alameda, one in Moraga and several in San Jose. The client I am working with on one was told by Wells Fargo that they needed to put 25% down. Depending on the rents you may want to consider more down to get a positive cash flow. If you would like that list pop me an email and I will send it to you.

Steve Curtis
Broker / Owner
DRE # 00350257
0 votes Thank Flag Link Wed Apr 20, 2011
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