Financing a multi unit in CANADA - Posted by garrett

Posted by Rich-CA on June 14, 2007 at 10:38:22:

Sorry you claim my facts are wrong. I just re-read the post and while it is very short, there is nothing in error according to the financing sources I have worked with. We may disagree and you may claim factual error, however you have not proved your case and the people who handle my financing have delivered for me in the past, so they have a track record that supports what I have passed on.

Financing a multi unit in CANADA - Posted by garrett

Posted by garrett on June 13, 2007 at 13:28:18:

Hi,
I am looking to purchase a multi unit property, details;
asking price $199,900
monthly revenue $6000

I am thinking of starting a corporation and purchasing the property through it. What size down payment will I need to get financing for the remaining balance?

Also, will lenders take into concideration the revenue potential of the unit?

any help is greatly appreciated

I can be reached at 250-552-4360 or email fgihomes@shaw.ca

Re: Financing a multi unit in CANADA - Posted by Rich-CA

Posted by Rich-CA on June 13, 2007 at 18:16:06:

Most of us can only answer for inside the US, but it might help to ask the questions locally.

How many units are in the multi unit? In the US, 1 - 4 units in the property is considered a conventional loan while 5+ are commercial. The difference is that the ability of the property to generate income is more important to a commercial loan. Also most commercial loans are non-recourse, meaning the only thing on the line for non payment is the property itself.

Re: Financing a multi unit in CANADA - Posted by John Corey

Posted by John Corey on June 14, 2007 at 09:55:49:

To be picky…

Rich wrote:

" In the US, 1 - 4 units in the property is considered a conventional
loan while 5+ are commercial. "

1-4 unit would be residential while 5 or more is commercial (multi-
family residential). At least when we are talking about units that people
live in.

Conventional is a term used for financing and you can conventional
and non-conventional when talking about 1-4 units. The term is not
tied to the number of units.

Other minor corrections…

The commercial status is not triggered by the income produced. It is
triggered by the loan type and the ability to package the loan with
other residential loans for sale in the secondary market (Fannie or
Freddie packaging is an example). Commercial loans are not sold in
residential MBOs.

Not all commercial loans are non-recourse though it is more common
with commercial.

John Corey

Re: Financing a multi unit in CANADA - Posted by Rich-CA

Posted by Rich-CA on June 14, 2007 at 10:02:10:

Some of these I agree with. However, I did not say commercial status was triggered by income. I said that a commercial loan cares more about that income produced by the property than does a conventional loan with its focus on the income of the borrower (rather than the property). Its the focus of the lending process and not anything about “triggers” that was the substance of my post.

Secondly, I said that you cannot get conventional financing for 5+ units. I did not say you could not get commercial for 1-4 units, though why you’d want something adjustable or with a balloon prior to the end of the term is beyond be. If you know a place that does 30 or 20 year FIXED for a commercial loan, and no early (prior to the end of that term) payoff or refi requirement please share as I have been looking for this for years (I don’t do hard money - interest payments come from our bottom line as well).

Re: Financing a multi unit in CANADA - Posted by John Corey

Posted by John Corey on June 14, 2007 at 10:14:03:

Even with the clarification you still have some of your facts wrong.
Read your own post and then check the details.

As to long term fixed for commercial property…

To get such a product normally will push you into a conduit facility.
The term will be no longer than the lease and the tenant needs to be
pretty strong if you expect lender to consider the income stream as
secure. A triple net building with a credit worthy corporation can be
set up on long term fixed financing.

Conduit financing will come with pre-payment issues so is best used
for long term deals where the loan will run to term. I suspect you have
already run into this given the way you asked the question.

In some ways what you want does not exist in the commercial sector.
The reason it even exists in the residential sector in the US is the MBO
secondary market.

John Corey