Compared 2 lenders on the same deal. Night and day difference

I ran numbers on a 4-unit in Cleveland last month. Two different lenders. One quoted me 5.2% with 1.5 points but wanted 35% down. The other did 6.1% with 0.75 points but only 25% down. The lower rate looked better on paper. But the extra cash I kept in my pocket changed my IRR by almost 2 points. Has anyone else run into this kind of trade off with their local banks?

2 comments

2 Comments

wesleybutler3d ago

Ran into this exact situation with a duplex last year. Local credit union beat a big bank's rate by 0.3% but wanted 5% more down. I ran the numbers and realized keeping that cash reservoir (emergency fund plus some light rehab money) was way more valuable than the small rate savings. Ended up going with the higher rate because it let me buy with a cushion. The first lender would have left me with basically nothing left after closing (scary stuff when you're dealing with older buildings). Your IRR point is spot on - that liquidity can make or break your returns if anything unexpected pops up.

caseyl183d ago

Damn straight. That cushion saved your ass, Ive been there.