Buying a multifamily property can be quite an investment. You need to have enough money to cover the huge price. Little wonder not so many folks take this investment path.
Though what if we told you that you don’t need your own money to purchase this property? Would that make you eager to grab the proverbial bull by the horns?
If you are eager and interested, this article will reveal several ways you can purchase that multifamily property you have in mind without having a ton of cash in your account. Let’s get right into it!
This option allows you to get funds for the down payment from a share investor who in return gets a percentage of the property’s equity. You can read this to learn more about equity in real estate.
With this agreement, the investor gets to receive a percentage share of the property’s equity either monthly or annually based on the agreement. The major advantage of this method is that you can easily attract investors.
When we say, “private money,” we’re not talking about your own money, we’re talking about money from private lenders. The fascinating thing about this source is that you don’t need to approach any organization or company. You can easily get this money from your network of family, friends, colleagues, etc.
Given that the investment is real estate, it’s usually an incentive for folks to lend you the money. They know that the returns they get from this deal can be quite beneficial financial-wise. Go ahead and speak to folks within your network, your investor might just be among them.
This term refers to money that is loaned out to a potential homeowner by small organizations or individuals. The credit score of the borrower is not used to determine if the loan will be granted. Instead, the property’s value the borrower wants to purchase is used as the determining factor.
To get the loan, the loan-to-value ratio of the multifamily property must be 65 percent (lower is better). Furthermore, it must meet the requirements the lenders set. If these requirements are not met, you can look for another hard money lender.
One thing you need to take note of is that the origination fees and interest rates of a hard money loan are quite high compared to a mortgage loan. Therefore, you need to carefully go through the terms of the agreement and confirm that you are willing to abide by them. Once you do this, you’re good to go.
As we said, individuals can function as hard money lenders. However, there is a process involved. You can learn how to get started by contacting pros in the field who’ll guide you if you’re interested in becoming a hard money lender. Doing this is a great way of building and diversifying your portfolio as you grow in the real estate industry.
While this option doesn’t apply to all multifamily properties, it’s a great way to make payment if it’s available. Material sales is the opportunity given by the seller, which allows the buyer to sell any valuable resources (manufactured or natural) found on the property. The money obtained from the sale of the material can then be used as a down payment.
In some cases, as a savvy investor, you can initiate this kind of deal. The seller might not consider certain items on the property to be worth anything. However, if you can detect the value of materials (even in dirt; it’s one of such materials that can be sold), you can approach the seller with the option to sell it for them.
If your current home is big enough with a room or rooms not in use, you can use house hacking to generate funds. All you need to do is list the free room or space online for rental. This is usually short-term as it allows you to get multiple guests thereby increasing income within a short period.
If you don’t know how to go about this, you can use Airbnb. On the other hand, you can visit https://smallbiztrends.com/ to discover alternatives to Airbnb you can use. Whichever option you choose, you need to ensure that the local regulations and lease agreement of your home permit this.
You might also need some permits depending on the regulations in your locality. Once that is done, take a picture of the room, and put it online to attract guests. Remember, the better the room, the better the guests it attracts. If done properly, you can generate the money needed for the property’s down payment through this method.
If you inspected a multifamily property that requires a good or fair deal of repair, you can utilize this method. How do you go about it? Simply take note of the needed repairs and then inform the seller about them before making the purchase. Then offer to do the repairs as your down payment for the building.
Once you strike an agreement with the seller, you can do the repairs yourself if you’re handy. However, the ideal option is to get professionals you might have worked with in the past who’d be willing to do the job at a discount or even take payment later. This way, you get to secure the building while you work towards closing the deal.
Although this is not so common, it can be a great option if available. This method involves the seller acting as a traditional mortgage lender. You can check here to discover the different types of mortgage lenders. In other words, you make payments to the seller over time to enable you to gain full ownership.
While you get the benefit of direct contact with the seller, the loan’s interest rate might be higher than traditional loans. Therefore, you need to consider if this is the best option for you. Furthermore, ensure that the agreement is well-documented to avoid legal issues in the future.
Making a down payment and buying a multifamily property can be quite expensive. However, there are options you can leverage to make down payments without having cash. This article has discussed some of these options in detail.