SS22: How Do You Buy a Multifamily Property with No Money

Charles discusses the different techniques investors are able to utilize in order to purchase multifamily properties with little to no money.

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Talking Points:

Looking to buy a multifamily or residential real estate investment property, but not keen on getting a traditional mortgage from a lender? Here are your alternative options, including how to purchase your property for no money down.

Types of Multifamily Properties

Commonly referred to as apartment buildings or apartment complexes

A property must have at least two adjacent housing units, either horizontally or vertically, to qualify as multifamily housing, these include:

Duplexes: One building divided into two separate houses, which are usually side by side

Triplexes and Quadruplexes: A triplex has 3 units, and a quadruplex has 4 units

Apartment Buildings: A building with multiple rentable units

Mixed-Use Buildings: A building that is used for multiple purposes, including residential, commercial, cultural, or industrial uses

Types of Financing Options

Federal Housing Administration (FHA) loan
- Ideal for purchasing Duplexes, Triplexes, or Quads
- Although the 1-4 unit property must be owner-occupied in order to qualify for an FHA loan. However, with this type of investment property loan, the down payment can be as little as 3.5%. Compare this to the traditional 20-25% down payment of a conventional bank loan.

Equity Share Investor
- Before looking for an equity share investor, you must first locate a promising multifamily property and in return for them putting up all or a majority of the funds for the purchase, they receive an equity share in the property and income thereafter.

Real Estate Syndication
- This is when several real estate investors come together to provide property financing for a real estate investment property.
- This usually takes the form of a real estate partnership, with other investors who have more financial resources than you do

Real estate Crowdfunding
- A much newer phenomenon, similar to real estate syndication whereby you source funds from a great many real estate investors, who you team up with to own and manage the property. This way you can get a stake in the property for no money down (if you are the one that is going to be managing it) or as little as $500 if the crowdfunding is large enough.

Hard Money Lenders
- While hard money lenders, who are essentially just private lenders who invest in real estate may not require a down payment in some instances (unlike a bank or other lender), if you’re target property is already generating a stable, consistent cash flow on a monthly basis. They’re financing will be more expensive in terms of the rate of interest charged and fees, with normal interest rates anywhere from 9% – 15% being common.

Outro

As you can see, there are plenty of viable options for purchasing property with little or in some instances no money down, it’s just a matter of determining which is right for you depending on the type of property you are looking to purchase, where, and how.

Transcript:

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing how do you buy a multifamily property with no money? So I get this question often from viewers and it’s something that I want to address because there’s some very good, no money down approaches, and there’s some very good, low money down approaches. So if you’re looking to buy a multi-family or residential real estate investment property, but you’re not keen on getting a traditional mortgage from a lender, here are your alternative options, including how to purchase your property for no money down. So types of multifamily properties, commonly referred to as apartment buildings or apartment complexes, a property must have at least two adjacent housing units, either horizontally or vertically to qualify as a multifamily housing. These are going to include duplexes. One building divided into two separate houses, which are usually side-by-side triplexes and quadplexes, which is where I started investing. Triplex has three units and quadplex has 40 units, apartment buildings. So a building with multiple rentable units. This is usually five plus units. So it makes it a commercial multi-family apartment

Charles:
Building mixed use buildings, which is something that I also started investing in. When I was younger. It’s a building that’s used for multiple purposes, including residential, commercial, cultural, or industrial. Typically you’ll see this in the downtown area and it will have some commercial retail office on the first floor and it’ll have residential apartments above it. So types of financing options available. So FHA, if you’re going to buy a one to four unit property, let’s say we’re talking both my family and this so two to 40 unit property. My, my best bet would be for you to find an F get an FHA loan on it, right? So this is where you can get in with these little three and a half percent down. This is how I started investing in real estate. I, what they call now house hacked. Back in oh six, purchased a three family property.

Charles:
I lived on one of those floors, the second floor. I rented out the first one in the third. And I was able to really after both those other floors paid their rent, I my portion, the mortgage was like 40 bucks. So it was great. And I even rented out my another bedroom in my floor, which made it actually cashflow. And it was fantastic learning experience. And that’s what I suggest my viewers, if you want to do this, this is a great way of getting into multifamily real estate. And although the one to 40 unit property must be owner-occupied in order to qualify for an FHA loan. However, this type of investment property loan, the down payment can be as little as three to 5%. As I pre-leased previously said, compare to a traditional 20 to 25% down payment for conventional bank loan. Now, another way of getting in is equity share investor. So before looking for an equity share investor, you must first locate a promising multi-family property and in return for them putting up all or a majority of the funds for the purchase, they receive equity share in the property and income bear after. So for instance, you’re what you’re doing is you’re finding a partner. That’s going to bring money to the table and your bringing time to the table. And this is something where, Hey, you put up the money for the purchase and we become, we have some sort of split that we prearranged that I will take care of this work, and maybe we split everything 50 50, or whatever it might be. And it’s really a joint venture that you’re setting up another way of doing it is real estate syndication. This is what we do. This is when several real estate come together to provide property financing for a real estate investment property.

Charles:
So usually takes the form of a real estate partner with other investors who have more financial resources than you do. For instance, there’s going to be general partnerships and then limited partnerships and so passive investors, and they’re going to be bringing money to the table. You’re bringing your experience and you’re bringing your time to the table. And that’s where you’re able to receive your percentage as being a sponsor or being a a syndicator. And I have a number of different episodes on this. So make sure you look it up, but that’s one other way of doing it. Another way is real estate crowdfunding. So a much newer phenomenon similar to real estate syndication whereby you source funds from a great number of real estate investors who you team up with to own and manage the property. This way you can get a stake in a property for no money down. If you’re the one that is going to be managing it, or as little as $500, if the crowdfunding is large enough.

Charles:
So this is more for an experienced real estate investor, but you can go to one of these platforms. They turn away. The majority of them have deals that they see as as my understanding, but the you’re able to put your deal up there and you’re able to raise money from mostly all accredited investors. And you can finance your deal and with little or no money. And really the more experience you have, the less amount of money you’re probably going to have be able to go into. The other way of doing this and an additional way is hard money lenders. Now, while hardly lenders who are essentially just private lenders, this could also be bridge lenders as well. When we’re getting into multifamily, commercial hard money, lenders are very similar to bridge lenders and how they operate. And they’re pretty much just private lenders who invest in real estate and they may not require a down payment in some instances.

Charles:
Now this is very rare for a bank. And if you have a relationship with a hard money lender or one of your partners does, this is where you can negotiate out these types of special circumstances. Are you gonna be able to call one that you find right on line and tell them, Hey, I want to buy with zero money down, show person down. They’ll probably hang up on you. But if you have, if you, or one of your partners have a relationship with lender, you may be able to work out in interesting deal with them where you might be able to put down little or no money. Now caveat might be with this is that you have to find a property that’s grossly undervalued, and this would be something that you’d have to explain to them. And it would take some work to explain to them, but you most likely would probably be able to get that down payment down and possibly eliminate it.

Charles:
If your target property is already generating a stable, consistent cashflow on a monthly basis, their financing might be able to cover the majority of the purchase price. And the majority of the down payment, who knows now their financing will be more expensive in terms of the rate of interest, charge and fees with normal interest rates, anywhere from 9% to 15% being, being very common. So this just goes back to having a relationship with them and it’s usually their money. So they might be able to work out a deal who knows. You might be able to bring the hard money lender in, if it’s a good enough deal. If they have an appetite for it, you might be able to bring them into your JV partnership. And that’s a fantastic partner to have. So, as you can see, there are plenty of vial options for purchasing property with little, or in some instances, no money down. It’s just a matter of determining, which is right for you, depending on the type of property you are able to purchase where and how. So please remember to rate, review, subscribe, submit comments, and potential show topics at global investors, podcast.com. I look forward to two more episodes next week. See you then.

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Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar incorporated exclusively.