Evaluating purchasing in SF. Have ~100k to put down, is triplex/quad for 1mil realistic to finance?

I am trying to learn more and evaluate the possibilities for a first time buyer. Would like to buy in the San Francisco area. We have ~100k we could put down, which would seem to work fine for a 20% down on a single 500k unit. However, I think that purchasing a duplex/triplex/quad would a much better investment.
Would purchasing a small muti-tenant property for 1 to 1.25 million be possible/realistic with this amount to put down? Is this a sound approach in theory? I am assuming we live in the property.
If so, should I start with a mortgage broker to understand what amount of financing would be realistic?
In Buying Property - Asked by Jobe L. - Oct 26, 2011
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Answer(s)

Cameron B.
Broker/Agent
San Francisco, CA

You should start with a mortgage broker or your bank. Financing has changed quite a bit in the past couple of years. It is not likely that you will find conventional financing for 10% down on a multi-family property. But again...check with your bank/lender.

Oct 27, 2011
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Jay Z.
Broker/Agent
Phoenix, AZ

You would normally want to put down 30% so that your payments are small and easily covered by the rental income. That approach is easier in Phoenix where a duplex is $60,000 rather than San Francisco where a duplex might be $600,000. Financing has dried up for many types of loans. You might have an advantage since you plan to live in the unit. Understand that the lender will be skeptical about that. They worry that you are saying that to get a better interest rate (many buyers say they will live there but never seem to move in). Look at lots of properties. You can even use public records and contact owners of properties that interest you. You might even get lucky and find an owner who won't require that you get a new mortgage. They will "carry" the loan for you with your $100,000 down payment.
Bargain hard. The economy is not doing well. $100,000 is a lot of money and someone should be interested in what you are offering.

Oct 27, 2011
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Rolando T.
Broker/Agent
Los Angeles, CA

It is possible if the rents cover the mortgage. Your mortgage would be around 5-6k at a 7% loan for $1m, that's conservatively speaking. Find a local credit union to do the loan for you. Your rents would need to be around 1500-$2k per unit so to cover the mortgage and have some extra for expenses, which they require. That's called a coverage ratio and they typically like to see 125 to 135% of the mortgage covered. So if your mortgage is 5k/mo, they may want to see $6,750 gross income from the property or 135% of the mortgage, for example.

Oct 28, 2011
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