Using FHA loans to secure apartment building ownership

Mortgage advisor: Dominique Stevens, Mayfair Mortgage Advisors.

Property type: Multi-family property in Fresno.

Loan amount: $907,000.

Purchase price: 950,000.

Interest rate: 6.75%

Loan type: FHA.

Backstory: As well as working with consumers to finance residential properties in California, we work with a vast cadre of real estate investors who purchase and finance commercial properties. From multi-family apartment buildings, to hotels, retail complexes and office buildings.

We’ve helped many an investor “graduate” from owning single-family rental properties, into apartment building ownership. The first step in the journey is often to buy a triplex or fourplex using easy residential financing. These investors focus on the acquisition and management of value-added multi-family properties which they reposition in high-growth markets that are surrounded by positive demand. The following is a case in point of an investor that we helped to purchase his first apartment building quite easily.

The Federal Housing Authority (FHA) will finance an individual to purchase a fourplex apartment building with only 3.5% down payment. No previous experience managing a commercial property is required. With this program, it is required that the owner live in one of the units as their primary residence for a minimum of one year.

After that time, the owner can depart the unit and rent it out. Our buyer chose to put 5% down to meet the FHA’s guideline regarding the maximum loan amount for the Fresno area.

The property our client chose experienced deferred maintenance, i.e. it is a bit shabby. However, for an investor, that can be an excellent opportunity. With some cosmetic upgrades and better management, the property can both increase rents (cashflow) and increase the value of the asset.

Once our investor located his property, his offer was accepted, and our team was able to obtain the “clear to close” promptly without delay.

With the American economy picking up steam, it also appears that the tide is turned on inflation. We should start to see a lowering of mortgage rates in the months to come.

Cheap money is one of the engines of our economy, however, we must remember that rates in the fours and fives are very cheap money indeed. We do not expect to see the interest rates in the twos and threes again. It was during COVID that the government was practically giving money away to prevent complete economic chaos and collapse. Let’s hope we don’t experience such a crisis again!

“The Federal Housing Authority (FHA) will finance an individual to purchase a fourplex apartment building with only 3.5% down payment. No previous experience managing a commercial property is required.”