How can real estate investors find the money for their multifamily real estate deals?
There are many advantages of investing in multifamily real estate—even over and above single family home rentals. Still, with bigger and more expensive properties (and returns) come bigger price tags and financing needs.
There are multiple ways to go about raising funds for multifamily property investments. The best path oftentimes depends on the deal, though there are options no matter what stage you’re in. On most deals, you’ll want to utilize the power of leverage. Typically, the first go-to solution is to try and get a commercial mortgage loan from bank. These typically require 25 percent down. However, on an $8M deal most people do not have $2M in cash lying around. So, they need to go raise it from somewhere.
If a bank can’t give you all the money you need, then seller financing—or a combination of both—can help. Owners understand the dilemma, especially when the property needs major upgrades. Even the largest and wealthiest funds and fund managers won’t typically put all of their own cash into a deal. Still, ask. Perhaps the seller will provide some financing with a lower down payment or a second mortgage. Be sure to watch the amortization rate, as that can impact your cash flow a lot. The more years, the better.
Friends and Family (Your Inner Circle)
This is where most people go to raise funds at the start because generally, the relationship is already established. Relationship is everything when it comes to doing the best real estate deals and borrowing or lending….