Multifamily Down Payment? Real Cap Daily #18

Lending standards are different across multifamily properties. Duplexes, triplexes, and four-plexes have different lending standards than buildings with 5 or more units. How much down payment do you need?

Hello, my name is Dennis Maynard, CCIM. I’m a real estate broker in Los Angeles. Please don’t forget to like, subscribe, and follow.

The down payment required for investors is different than those that purchase to live in the property. This applies to properties less than 4 units including single family homes.

The absolute best interest rates are given to individuals who put down 40%. Is this required, no. The minimum down payment for up to 4 units is as low as 3.5%, but at an increased cost and must be owner occupied. Down payments of 20% or less require mortgage insurance. For investors, a 20% down payment is required for conventional loans.

For commercial property including multifamily, the customary down payment is 35%. Some lending programs may offer higher LTV’s, it just depends. The reason for the large down payment, the property and income are being used to qualify for the loan. The investor owner will also be qualified, but it is the income and condition that are primary. Lenders use something called DCR or Debt Coverage Ratio to determine max LTV’s. I cover this in the video linked above. 35% down for commercial multifamily properties is a solid rule of thumb. 

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