MFREE 073 Trailer # 2 with Travis Hill: What's the Real Difference Between Residential and Commercial Multifamily Properties?

In this insightful episode, we dive into the critical distinctions between residential and commercial multifamily properties. 

Travis Hill explains the differences between a duplex and a quadplex versus a five-unit property, highlighting how just one additional unit can change the game entirely. 

We explore how loan qualifications and valuations shift dramatically from residential to commercial properties, including the different rules, requirements, and paperwork involved. 

If you're looking to understand how to navigate the transition from residential to commercial real estate, this episode is a must-listen! 🏠🏢💼

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Thank you to all of our listeners!!! We would love to hear from you!!!

Email me at:
hutch@hsquaredcapital.com

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Transcript

Speaker: 0:04

Travis, you mentioned that you bought small commercial properties, can you help our listeners understand what can be considered a residential multifamily versus a commercial multifamily?

Speaker 2: 0:15

Sure. Typically, it's four unit or less. So a quadplex down to a duplex is considered residential multifamily and five units or over is considered commercial in most states, but always check with your state because it may fluctuate.

Speaker: 0:28

Yeah. So how does qualification change between those two asset class? We only got one unit different, right? Four unit, five units. How does qualification for those loans change and the valuation changes for those property?

Speaker 2: 0:39

Whole bunch. When you get into commercial multifamily, even at five units for the state of Ohio, you now become an entity, you're a business, you're getting with commercial loans, you're meeting with commercial lenders, whole different set of rules, whole different set of requirements, whole different set of paperwork, whereas if you're buying a quadplex, you can still be Travis Hill with your W 2, your income, your debt to income ratio, like all that stuff, your bank statements, you can still do that at a quadplex, but as soon as you go into the commercial realm now, like understanding that you're LLC, you probably have some business credit. It should be established where your funds coming from. It's a different ballgame.