Multi Family 5 units Financing

Asked by Mike, Oakland, CA Sun Mar 6, 2011

Hi All,
I would like to purchase a 5 units property and not sure how to go about financing ( or if it’s even possible for me ) given my scenario bellow

What I would like :
To ideally purchase an 8 units property for around 600K and live in one unite in Oakland area.

About me :
680 middle FICO score
30K savings
120K income 10K bonus a year
On the job for 4 years
100 a month liability ( credit cards / auto loan ) easy to pay off if needed

Thank you for reading

Help the community by answering this question:

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Web reference:


Gilbert Richards’ answer
Gilbert Rich…, , Santa Clara County, CA
Sun Mar 6, 2011
Mike this is not going to work. You will need a minimum of $150,000 as a downpayment. Not to mention, commercial financing is based on debt coverage. That means they want after all expenses the rent to cover 1.25 or more the mortgage payment.

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.
1 vote
Antoine Pirs…, Agent, Oakland, CA
Mon Mar 7, 2011
Hi Mike:

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.
Web Reference:
1 vote
Thierry Abel, Mortgage Broker Or Lender, Corte Madera, CA
Sun Mar 6, 2011

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.


Thierry Abel
Senior Loan Consultant
By Referral Only
All California Mortgage, Inc
P: (415) 464-8261
C: (415) 378-7508
F: (415) 464-2367
1 vote
Antoine Pirs…, Agent, Oakland, CA
Wed Aug 17, 2011
Hello Mike:
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.
Kind regards
0 votes
Sue Cortes, Agent, Livermore, CA
Wed Aug 17, 2011
Hello Mike,

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.

Sue Cortes
Prudential CA Realty
0 votes
Kamal Randha…, Agent, El Sobrante, CA
Mon Mar 7, 2011
Hello Mike,

Work with a reputable lender, your own bank would be the best to start with.

Once you are approved, I would be happy to show you properties with positive cash flow.
0 votes
Mike, Home Buyer, Oakland, CA
Sun Mar 6, 2011
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 don’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
0 votes
Menelva Boyd, , Oakland, CA
Sun Mar 6, 2011
Contact a good lender and let them know that prices are from $565K to $849K for units on the market now.
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.

Good luck!
0 votes
Thierry Abel, Mortgage Broker Or Lender, Corte Madera, CA
Sun Mar 6, 2011
You can indeed get a FHA loan for a multi-unit property (up to 4 unit)

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 rent– minus 15% vacancy factor (in CA)
0 votes
Travis Hill -…, Agent, Oakland, CA
Sun Mar 6, 2011
Mike the other two agents are correct, getting pre-approved will allow you to fine tune what your really looking to purchase. Oakland has a lot of prime opportunity to purchase investment property, the key is finding the desirable areas that people feel comfortable renting. I think you should focus on renting 2 to 4 unit properties as this will allow you to purchase using an FHA loan with 3.5% down payment. FHA provide home owners with a special loan called 203b which allow you to purchase 1 to 4 units dwelling. Based on your qualifications above you won't have a problem getting pre-approved. Please visit: for more information. Give me a call at (510) 367-5411 or email: and I'll put together a customized list of bank owned duplex, triplex and fourplex units in Oakland for your review...? Visit my company website:
0 votes
Larry Benede…, , Oakland, CA
Sun Mar 6, 2011
Hi Mike,

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


Larry Benedetto
0 votes
Troystaten, Agent, Alameda, CA
Sun Mar 6, 2011
With 5+ lending the lenders are usually looking at the buildings ability to pay for itself. If the rental income does not cover the payments, taxes and insurance plus a vacancy factor they are likely not to lend on the property, often they want a higher than twenty percent down payment as well. You really should be intouch with some commercial loan brokers to talk about what lenders are looking for. You might also talk to some of the smaller commercial banks as well.

Good luck
Web Reference:
0 votes
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