How To Get Multifamily Real Estate Financing with Little to No Money
Is a lack of funds keeping you from investing in real estate? Don’t let it!
Multifamily real estate financing can be a good source for creating steady cash flow. If you invest in multifamily properties, the chances that you can create more net worth than single-family properties.
It can provide more cash flow, substantial tax breaks, and easier management. Perhaps you might be assuming that investing in a multifamily property is beyond your reach and in that case, you might be wondering how to get multifamily real estate financing.
When planning to purchase a multifamily property, you need to be creative with your financing options. This article has listed five strategies to help you get finance with little or no money.
# 1:Private Money
Getting a loan from private money lenders is not only useful when acquiring single family properties. Private loans can also be useful when long-term multifamily financing is your priority.
Private real estate investment lenders don’t have to be connected to investment firms like single-family properties. You can easily find some of the best private money lenders in your social network, including family, friends, doctors, colleagues, etc.
Now you might be thinking, why would someone offer you money? The answer is simple, a successful multifamily project can generate better returns than an retirement account.
# 2: Equity Shares
It may be more difficult to find an equity share investor than working with a private money lender. When you get a loan from a private lender, you promise a regular return to the investor. But on the other hand, with an equity share investor, you are offering a portion of your property in exchange for the funds needed for the down payment.
For example, if you were to get a loan of $100,000 from an equity share investor towards the multifamily property. And you agreed to pay a 40 percent share of the equity to the investor, it means that the investor will receive 40 percent of the property’s cash flow and 40 percent of the proceeds from the sales of the property. Visit VP Capital for all kinds of fix and flip financing needs.
Equity shares can be a powerful way to attract investors, due to the opportunity to generate cash flow in both short term and the long-term scenarios.
# 3: Material Sales
Material sales may not always be possible for every type of project.
But still, there are times when the property may contain valuable natural resources you can sell when you buy the property. These resources can help you generate down payments for permanent multifamily financing.
These materials could include dirt, fertilizer, gravel, timber, plants, and could be any other resource that may prove valuable to another party.
See past the perceived value of the multifamily property and determine if some hidden opportunities can make the deal much more realistic for you.
#4: Hard Money
A hard money loan is often a short-term loan that does not come from traditional lenders. Instead, these loans often come from individuals or private companies that accept the property as collateral. Often borrowers turn to hard money loans when traditional sources deny their loan application for commercial multifamily financing.
Hard money loans are secured loans and guaranteed by the property used to purchase most of the time. So, if the person cannot pay the loans, the lender can take ownership of the property and take back the losses.
Usually, the interest rates for hard money loans are quite higher than traditional loans. But you can always strike the best deals if you do your homework.
#5: House Hacking
House hacking means renting the half portion of your house where you are currently living. Suppose you have enough space in the house, whether a spare bedroom or loft, you can share these properties online and generate cash flow with the rental income. Many investors use Airbnb as an opportunity to generate cash flow for an investment project. You can price the rental according to locality or listings available in your area.