Hello all! I am a new, and very motivated investor in the Hampton Roads, Virginia region and I am searching high and low for multi-family or small apartment complexes. However, I am struggling to figure out the best approach for financing, if I do not have all the capital traditionally required for a down payment.
If I decide to go with a lender, am I really going to have to come to the table with at least 20-25% down? I have some capital to invest, and luckily my mother is willing to invest with me, so that adds some significant capital, as well...
Essentially, I am looking for the smartest way to being qualified for a loan or any kind of financing, on an 10-20 unit apartment complex in and around $400,000 - $500,000 that would definitely cash flow!
I am non-stop reading and educating myself with this but can't seem to find the best answer, please help!
Yes a traditional lender is going to expect 20-25%+ down. If you don't have the capital then partnering in some form, or perhaps some type of owner financing are options.
I would first recommend not having your first investment be a 20 unit building unless your day job is in real estate. That is a bug animal to start with. Also above 4 units is commercial financing and unless you get an owner to finance or a partner the lender will require a large down payment. I have not seen properties that size offer owner financing as typically sellers want out and to get there money.
if you see @Anthony Chara
Check out his profile, he coaches apartments, probably the best training for money
Master lease options on apartments can be a way to enter the marketplace
You need to be able to guarantee the owner on a master lease, and you have an option to purchase a later date based on the lower NOI or net operating income
I would start an LLC and get partners, you do the work in partners fund the company
@Brian Gibbons What kind of timelines do you usually recommend to execute the option? Ample time to reposition and stabilize is nice, but do you ever find that the owners have short memories when it comes time to purchase?
tough question to answer
- You look for properties that Owners appreciate the help.
- You need a good attorney and see the owners every six months.
- You need private investor for MLO or master lease options on apartment buildings.
- And if you turn it around you can sell your option.
PM me if you want a free consult.
@Brian Gibbons that sounds like an awful lot to ask of a first time investor. I would think a better option might be to buy a duplex or three family and live in one unit and rent out the other two. Build up some equity, refi, and buy another. Low down payment options exist and there is much less risk. I think a MLO is a strategy more suited to a seasoned investor that is heavily capitalized, no?