Expert: Terrence Cullen - 7/28/2007

Question
Hi Terrance:

I am currently in the process of purchasing a multi-unit dwelling.  I am curious as to the best way to purchase it.  I can put 10% down and get a conventional loan against it, paying PMI.  I can put 20% down and avoid that.  I have more than enough equity in my private home to re-fi and purchase the units outright.  What is best in your opinion?  Also, can I form and LLC, and use that entity to borrow money from myself(home equity loan)?  When I get the property up to code, could the LLC then re-fi the rental units and pay myself back the loan?  As you can guess I am a little new to this, but this is something I have always wanted to get involved in.

Thanks

Answer
Where is the property? How many units are we talking about? Because a 5 unit property has more financing options than a 4. Is the multi-unit dwelling currently producing income? A property that has a steady income can qualify for a non-recourse loan and a lower rate.

When you are purchasing commercial property at this level, it is better to put 20-25 down because the rates will be better and so will the terms.  

I am currently funding small apts and commercial properties-I can give you more exact info if I have the property info. You can call me if you like at 703/448-4224 or e-mail me directly at terry.cullen@wamu.net.

Good Luck,
TC