You’re looking to start building or renovating a property, and Cornerstone Bank is ready to help with multi family loans in Kansas City to suit your vision, your goals, and best of all—your budget.
For over 20 years, Cornerstone Bank has provided the financial foundations for area business leaders and entrepreneurs, just like you, to build their dreams. You’ve got the drive, you’ve got the vision, and we’ve got the resources. Let’s build the future together.
First, let’s make sure we’re talking the same language.
The difference between multi family and single-residence
In the business world, a multi family “home” is quite different from single-family housing.
A multi family property involves a single property with five or more units. These units may be detached, semi detached, row house, or multifamily structures such as apartment buildings (according to US code 12 USC § 1715z-22a(1)).
Taking a single residence and renting out the basement, or maybe one or more bedrooms (also called “house hacking”), doesn’t qualify. A multi family property requires that each residence have its own entrance, address, and utility meter, along with all the home necessities, like its own bathroom and kitchen. The residence may share walls with other residences, but it must exist as its own entity.
Multifamily properties are usually owned by a single person or entity, unlike condos and some apartment buildings where the residences can be owned by the occupants. The owner might live in one of the units and rent the others, or the property could have multiple parts of a family living together, but in separate units.
A single family home allows for one family to occupy it, with a single address, utility meter, entrance, etc. The majority of suburbs consist of single family homes, whether purchased by the occupant or as a rental.
Now that we’re sure we’re talking about the same kind of property, let’s work together to secure a multi family loan for you. You might be surprised at Cornerstone Bank’s knowledge of the subject, and willingness to help you achieve that multi family loan. It’s because we know there’s a win-win result for our community.
Multi family homes are cost-effective for the renter and the owner
Renters seek out multi family housing for a variety of benefits, including:
- The lower cost of monthly rent versus the higher cost of a mortgage and its associated expenses
- Apartments require no yard work or H.O.A. enforcements
- Market fluctuations where single-family home prices balloon out of reach
- Selling a home during a seller’s market for capital gain, then living in a multi family dwelling until the market adjusts
For the owner, the cost advantages of multi family homes versus single-family dwellings include:
- Improved rental income per square foot
- Lower cost of maintenance due to shared elements (walls, roofs, etc.)
- Lower bottom-line impact when a unit is vacant, where the filled units can help “carry” the mortgage
- Paying for part—or all—of your mortgage through rental income from the other units, when you choose to live in one of the units on that property
First time considering a multi family loans in Kansas City? Here’s what you need to know.
Is the multi family property you’re considering residential or commercial?
This distinction can affect your loan possibilities, and your financial upfront necessities. A simplified rule of thumb:
- Residential means two to four units
- Commercial means five or more units
Residential and commercial loans fall into different categories, each with different interest rates.
Once you know which kind of property you’re looking to purchase, you can zero in on which of the multi family loans you could use. Try our handy Cornerstone Bank Loan Tool for understanding where you are now, and what you might need to support that loan. Or just talk to us in person. We’re always here for you.
What are your pain points?
Be honest with yourself. What do you want to deal with as an owner-investor?
Are you good at handling emotional complainers? And can you enforce rules on very nice, but sometimes unpredictable, renters?
You might be super at being a super, but you might have to include the expense of hiring out, should you not enjoy snaking toilets or mudding drywall.
How do you feel about being woken up at 2AM for a building issue that can’t wait until daylight?
If you’re new to multi family property ownership, you might want to start smaller. They’re usually more affordable and offer the least risk.
Do your due diligence
As you put the multi family “home” in your homework, and get ready to apply for multi family loans in Kansas City, here are some check marks to check:
- Is the multi family property priced below market value?
- Does the location draw renters for higher demand?
- Are you following the 50% Rule? That’s where you spend fifty percent of the income from your property on expenses, rather than the mortgage. It’s not absolute, but it’s a solid target if you’re new to multi family property ownership.
- Does the property meet “green” standards? This can help with pricing.
- Is the property “affordable housing” certified? This too can help with pricing.
- Who is the seller? If a bank is selling the property, you might be able to create a different, and more beneficial, deal. Understand who’s selling before you buy.
Related external link: 26 multi family home buying tips
Ready to move forward? Cornerstone Bank has the just-right fiscal fit.
With Cornerstone Bank, you might have a variety of options on multi family loans. Our loan experts will be more than happy to talk through what they are, and how they can work for you.
Here are some examples you may or may not be aware of.
Conventional multi family loan
Conventional multi family loans can work great for owners/investors looking to purchase a residential multi family property. The financial institution typically finances this kind of loan, but still must follow Fannie Mae and Freddie Mac minimum mortgage requirements.
This kind of loan won’t have all the flexibility of commercial loans, but they are most familiar with buyers and might be your best course of action depending on possible factors, including a loan’s property restrictions and the pricing of the loan.
A portfolio multi family loan
Are you looking at more than one property, or do you not qualify for a conventional mortgage? A portfolio multi family loan might be the best option. This kind of loan doesn’t have to comply with federal guidelines, which means greater flexibility in loan-to-value ratios, debt-to-income ratios, and the size of the loan you want to receive.
Short-term multi family loan
Are you more interested in a quick, in-and-out business opportunity? If you have a “fix and flip” business model, this type of loan, often called a “bridge loan,” is most likely the financial tool you want.
From distressed properties to inheritances to “golden opportunity” finds, your short-term ownership goal can be met by this loan, with a term typically in the six month to three year range. Ask about discounted payoff opportunities when you talk to your Cornerstone Loan expert.
What to bring when you apply for multi family loans in Kansas City
As you’ve seen, there are several kinds of multi family loans available depending on your specific needs, and a Cornerstone Bank loan expert can guide you to the right fit. However, there are some basics you’ll want to have handy from the first conversation to the dotted line.
Personal financial statements
When evaluating an investor for a multi family loan in Kansas City, our loan officers will look at your personal financial statements to make sure you don’t show up on CAIVRS, the Credit Alert Interactive Reporting System. How deep we’ll go depends on the number of units in the multi family property you want to finance. Be prepared to share several years worth of tax returns, W-2’s, current financial holdings, and your paystubs.
Debt service coverage ratio (DSCR)
Take your net operating income and divide it by your total debt service. You’ve just calculated your DSCR. If that number is over 1.25, we may need you to show evidence of one-half to a full year’s worth of tax returns, rent payments, and cash reserves.
Having a respectable credit score always makes the avenue to a multi family loan far less bumpy. A good minimum is 680.
Your down payment amount is dependent on your loan type and its LTV. It’s best to talk to a Cornerstone Bank representative to see how much you can expect that to be.
Cornerstone Bank is there, by your side, every step of the way.
Rates change constantly. Cornerstone Bank will keep you informed, engaged, and ready, with quick services to lock down multi family loan rates, get the loans approved, and get you the capital you need to pursue your business goals.
Find out more about our multi family loans in Kansas City. Let’s build the future together.
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