Multi-family mortgage qualifying

[torontowest]

Currently own 2x triplexes with more than 20% equity, they are on residential rates. Goal is to purchase a multi-family with little or no down, explored the option of going with jv partners but I`m not sure I would want to share control and decision making with someone else. Most JV partners that I have considered will not work out because of the potential for differences in opinions, which I forsee down the road. Having said this, what is the best way to get into a 4 or 5-plex with as little money as possible. Is VTB the only option? What are lenders looking for in terms of qualifying criteria and min. downpayment requirements.

 

[Thomas Beyer]

QUOTE (torontowest @ Nov 20 2010, 05:08 PM)
Having said this, what is the best way to get into a 4 or 5-plex with as little money as possible. I


15% down is THE BARE MINIMUM .. and very rare these days .. in a 5-plex .. and 20% down for a 4-plex as it is usually treated like a single family house !



NO bank will give you a loan with no money down. A VTB is possible up to 80's % .. in case the bank gives you only 70% which is not uncommon in multi-family !



The cash down (for the 15-30%) comes from your own jeans or from JV partners. JV partners that want "control" are not partners you want. You want partners that believe in your vision and can write a cheque for the 15% to 35% down + reserves.



YOU need to control the venture and they need to believe in the plan laid out. That requires, from your end, a well laid out and believable and executable plan !! That usually requires

1) some real world experience,

2) some salesmanship and

3) decent experience in the asset class.



How do you stack up on those 3 important pillars ?



The plan could be:

a) buy .. upgrade .. flip, or

b) buy .. upgrade .. hold for 5 years .. sell, or

c) buy .. upgrade/hold for 5 years minimum .. then decide. If one wants out (you or partner) it must be sold !

d) buy .. upgrade .. sell as condos



In many inexperienced operators case this happens:

e) buy .. manage poorly / run out of cash .. sell at a big loss .. end of story !



Since you have no experience it will be very hard (but not impossible) to find JV partners. Best to sell both triplexes .. and then buy a 12-20 plex with the cash yourself .. then after 1 or 2 more go to partners !



Don't ask others to fund your dream .. tell a story that is realistic and that they can buy into .. so they can pursue their own dream ! The story includes you and the project, with LOADS of backup info, such as a website, with stats/reports/graphs/pictures/numbers .. and a proper legal agreement and a brochure and/or JV binder and/or PPT presentation.

 

[torontowest]

QUOTE (ThomasBeyer @ Nov 20 2010, 05:59 PM) 15% down is THE BARE MINIMUM .. and very rare these days !

The plan could be:
a) buy .. upgrade .. flip, or
b) buy .. upgrade .. hold for 5 years .. sell, or
c) buy .. upgrade/hold for 5 years minimum .. then decide. If one wants out (you or partner) it must be sold !
d) buy .. upgrade .. sell as condos


The plan is to b) buy .. upgrade .. hold for 5 years .. sell, or

QUOTE (ThomasBeyer @ Nov 20 2010, 05:59 PM) Since you have no experience it will be very hard (but not impossible) to find JV partners. Best to sell both triplexes .. and then buy a 12-20 plex with the cash yourself .. then after 1 or 2 more go to partners !

I`m currently self-managing the triplexes and an investment condo, I`ve had them for approx 8yrs, 7 yrs and 2yrs respectively, granted theres not a whole lot involved, Ive done a few reno/upgrades to the units using building and maintenance contractors and been through the a - z from procuring the estimates to finishing the projects and getting the tenants in. Have seen all sorts of issues from simple plumbing, electrical problems to basement moisture, roof leaks, furnace replacements etc. Would you say that I would need to get my feet wet more in order to be ready to handle larger buildings? My plan is for anything upto an 8 plex, I plan to manage it myself in terms of securing tenants, marketing, overall decision making on repairs, renos, upgrades etc and would outsource the actual work to a qualified professionals whom I`ve worked with in the past.


QUOTE (ThomasBeyer @ Nov 20 2010, 05:59 PM) Don`t ask others to fund your dream .. tell a story that is realistic and that they can buy into .. so they can pursue their own dream ! The story includes you and the project, with LOADS of backup info, such as a website, with stats/reports/graphs/pictures/numbers .. and a proper legal agreement and a brochure and/or JV binder and/or PPT presentation.

What is usually the expectation in a jv, do partners typically expect a dividend every quarter what would you describe as a successful jv

 

[Thomas Beyer]

QUOTE (torontowest @ Nov 20 2010, 07:09 PM) The plan is to b) buy .. upgrade .. hold for 5 years .. sell, or
that`s good .. build a website and JV presentation to that effect ..

QUOTE (torontowest @ Nov 20 2010, 07:09 PM) I`m currently self-managing the triplexes and an investment condo, I`ve had them for approx 8yrs, 7 yrs and 2yrs respectively, granted theres not a whole lot involved, Ive done a few reno/upgrades to the units using building and maintenance contractors and been through the a - z from procuring the estimates to finishing the projects and getting the tenants in. Have seen all sorts of issues from simple plumbing, electrical problems to basement moisture, roof leaks, furnace replacements etc. Would you say that I would need to get my feet wet more in order to be ready to handle larger buildings? My plan is for anything upto an 8 plex, I plan to manage it myself in terms of securing tenants, marketing, overall decision making on repairs, renos, upgrades etc and would outsource the actual work to a qualified professionals whom I`ve worked with in the past.
yes you have enough experience WITH YOUR OWN MONEY .. if investors buy into your vision is up to you to present / convince them !!

QUOTE (torontowest @ Nov 20 2010, 07:09 PM) What is usually the expectation in a jv, do partners typically expect a dividend every quarter what would you describe as a successful jv

it depends .. some like regular cash-flow .. and some can wait 5 years !

study JV techniques/options via REIN system !!

 

[torontowest]

QUOTE (ThomasBeyer @ Nov 20 2010, 09:17 PM) yes you have enough experience WITH YOUR OWN MONEY .. if investors buy into your vision is up to you to present / convince them !!

Thats great advise, as much as I dislike the sales pitch its starting to sink in that its an inevitable necessity if I want to grow beyond the current properties into the larger plexes, either that or save the downpayment which could take years and lost opportunities along the way, thanks Thomas.