All
Members
Companies
Blog
Forums
Podcast
Webinars
    User Log in  /  Sign up
  • Forums
    Newest Posts Trending Discussions Followed Forums Real Estate News & Current Events General Landlording & Rental Properties Buying & Selling Real Estate Deal Analysis See All
  • Education

    Read

    BiggerPockets Blog BPInsights: Expert Analysis Guides Glossary Reviews Member Blogs

    Watch

    Webinars Video Library Financial Independence Blueprint Intro to Real Estate: Rentals

    Listen

    BiggerPockets Real Estate Podcast BiggerPockets Money Podcast BiggerPockets Business Podcast Real Estate Rookie Podcast Daily Podcast (Audio Blog)

    Topics

    Business Operations Finance Finding Deals Property Management Property Types Strategy
  • Network

    Recommended Vendors

    Real Estate Agents Mortgage Lenders Companies Hard Money Lenders Contractors Investment Companies

    Search

    Members Events Jobs
  • Tools

    Calculators

    Rental Property Fix and Flip BRRRR Rehab Estimator
    Wholesaling Mortgage Payment 70% Rule Airbnb

    Services

    BPInsights: Property Insights Tenant Screening Property Management Lease Agreement Packages

    New Feature

    BPInsights (beta)

    Quickly analyze a property address or ZIP Code to compare your rent in your neighborhood.

    Analyze a property
  • Find Deals
    Real Estate Listings Find Foreclosures External Link Ads, Jobs, and Other
  • Bookstore

    Real Estate Books

    Profit Like The Pros Bidding to Buy See all books

    Featured Book

    BiggerPockets Wealth Magazine book cover
    BiggerPockets Wealth Magazine

    Written by financial journalists and data scientists, get 60+ pages of newsworthy content, expert-driven advice, and data-backed research written in a clear way to help you navigate your tough investment decisions in an ever-changing financial climate! Subscribe today and get the Oct/Nov issue delivered to your door!

    Get the Magazine
  • Pricing
Log In Sign up
User
Quick search links
Podcast Hard Money Lenders Books Washington
BlogArrowMortgages & Creative FinancingArrowThese Are My Favorite Ways to Finance Multifamily Investments
Mortgages & Creative Financing

These Are My Favorite Ways to Finance Multifamily Investments

Sterling White
Expertise: Commercial Real Estate, Personal Finance, Real Estate Marketing, Business Management, Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing
233 Articles Written
multifamily-benefits

More and more real estate investors are discovering the advantages of multifamily property investing. The one thing that holds most back is how to fund these larger real estate acquisitions. Fortunately, there’s more than one way of financing multifamily deals. Here are three of my personal favorites.

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

Seller Financing

Seller financing is often available on commercial properties. Partly due to the higher purchase amounts — but also due to the available buyer pool. It also often just makes sense for the sellers. It helps them lower potential taxes and gives them the passive income they really want — from an asset they are already familiar with.

Related: Why the Wealthy Put Their Money Into Multifamily & Commercial Real Estate

Seller financing is great for funding these deals because you don’t have to jump through the hoops upfront with a lender. You can also spread out your capital on more deals and gain the slack to get older buildings performing before applying for more attractive long-term financing.

The one downside is having to deal with uncertainty over whether the seller can, and will, hold up their end — and the uncertainty of where the market will be when it comes time to refinance. On my first deal like this, I put down $200,000, and the seller provided a $700,000 loan. The remaining funds (to address building upgrades) were raised from investor partners. An update on that project can be found here. The $700,000 loan has a balloon payment in three years, at which point we’ll go with our regional bank or obtain a small balance loan from Freddie Mac.

Regional Banks

Small regional and local banks can be great options, too. They are often willing to give better rates and terms because they are very familiar with the area and want to invest locally. That can mean longer amortization schedules, higher LTVs, and less paperwork to go through. They can get aggressive on their terms in attempt to compete with agency and bigger bank lenders. 

Try building relationships with these local bank managers. Putting your cash on deposit (which you will likely need to do to get a loan) with them can also help in securing the best terms or obtaining an additional line of credit for repairs and emergencies.

These institutions may also be easier to work and negotiate with in the future, in the event you ever run into problems.

Related: Multifamily Myths: Why Newbies Think Multifamily is Easy to Buy & Finance

Crowdfunding

Real estate partnerships have been around for thousands of years. New methods of crowdfunding real estate deals just take this to a new level, with more reach and efficiency. Crowdfunding in essence is the practice of funding a project or venture by raising many small amounts of capital from a large number of people. 

Individual investors can launch their own crowdfunding campaigns to raise the money for their multifamily investment deals, or they can participate in offerings others are running. You can fundraise the entire amount needed for acquisitions, repairs, and holding costs until performing — or just a part of it in combination with the other options above. Crowdfunding can be used for both debt and equity financing.

The one thing investors need to understand about this strategy before rushing to launch their own fundraising campaigns is that it can require a significant investment in setup, paperwork, legal work, and promotion to make it work. 

Summary

If you’ve been looking for a way to take advantage of the opportunities and benefits of multifamily investing, these financing options can help. You can use them to fund your own deals by yourself or participate in crowdfunding opportunities and simultaneously diversify into more investments. These options have worked for me and remain my personal favorites.

What are your favorite ways to finance multifamily deals?

Share them below!

By Sterling White
Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Through the company he founded Sonder Investment Group, he owns just under 400 units. Sterling was featured on the BiggerPockets Podcast and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single family investing and apartment investing to wholesaling and scaling a business.
Read more
1 Replies
    Thomas Hubbard Rental Property Investor from Little Elm, TX-Texas
    Replied about 2 years ago
    Thanks for the article Sterling. I am trying to break into multi-family in 2019!

    Report Abuse

    Why are you reporting this?

    Additional Comments (optional)

    Cancel
Rotate Log in or sign up to comment

Related Blog Posts

Mortgages & Creative Financing Feb 17, 2021

How I Find Private Money Lenders to 100% Fund My Deals (& How You Can, Too)

By Anson Young

Don’t let a lack of funding hold you back from investing in real estate. Looking for money to buy deals? Consider private money lenders.

Read more →

Mortgages & Creative Financing Feb 10, 2021

Mortgage Interest Deductions 101: What You Should Know

By Whitney Hutten

For homeowners and investors, the mortgage interest tax deduction can be a big help. Learn about the rules, limits, and how to claim it.

Read more →

Mortgages & Creative Financing Jan 27, 2021

Best Deal Ever: Making a Good Deal Great by Negotiating Seller-Held Terms

By Ken Corsini

Matt Oviat explains how he has been able to successfully navigate the pricey Utah real estate market by using some creative terms.

Read more →

Mortgages & Creative Financing Jan 07, 2021

4 Golden Rules of Real Estate Investing

By Jeff Brown

Real estate investing looks different for everyone. But being conservative with your investments can pay off in the long run

Read more →
Log in Sign up

Log in

Forgot password?

If you signed up for BiggerPockets via Facebook, you can log in with just one click!

Log in with Facebook

Or
btn_google_dark_normal_ios Created with Sketch. Continue with Google

Let's get started

We just need a few details to get you set up and ready to go!

Use your real name

Use at least 8 characters. Using a phrase of random words (like: paper Dog team blue) is secure and easy to remember.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.

Or
btn_google_dark_normal_ios Created with Sketch. Continue with Google

Why create an account?

Receive a free digital download of The Ultimate Beginner's Guide to Real Estate Investing.

Connect with 1,000,000+ real estate investors!

Find local real estate meetups and events in your area.

Start analyzing real estate properties, we do the math for you.

It's free!

Explore

  • Membership
  • Community
  • Education
  • Marketplace
  • Tools
  • FilePlace
  • REI Resources
  • Perks
  • Glossary
  • Reviews
  • iOS App
  • Android App

Company

  • About Us
  • Press
  • Advertising
  • Careers
  • Stats
  • Contact Us

Important

  • Editorial Guidelines
  • Terms of Use
  • Rules
  • Privacy
  • FAQ

Social

  • Facebook
  • Twitter
  • YouTube
  • Instagram
© 2004-2021 BiggerPockets, LLC. All Rights Reserved.