Currently living in my first house- a duplex where my tenant is paying about 80% of my mortgage. I'm already working on putting in a small efficiency apartment above the garage (which I plan on moving into when it's done) which should yield about $225-250 a door/month profit when I rent out the second unit. I'm paying down debt like crazy and saving for my next property.
Of course I look the other day and there is a gorgeous 14 unit for sale in one of my favorite neighborhoods. The preliminary numbers look good- (obviously much more in depth research is needed) but it brings up the question- how do you finance the 'big' one? This would be the one where I could quit my everyday job if I wanted to. (I don't plan on quitting any time soon- but it's a nice thought.) I'm not in a position to go knocking on the bank's door. What alternative financing methods are out there? I'd rather avoid a balloon payment and as of right now I have no partners but would consider one.
Doubt I could make this happen but who knows?
There are many ways to make this happen, partners, owner financing, syndication etc etc
But not to sound harsh but commercial is much different than residential. If you have no track record lenders will want substantial liquidity post close and for you to have a lot of experience in real estate.
It also helps to have several other properties paid off as they’ll look at that as assets you can use in case things go south.
You’d need to bring money, so get a partner and call some banks and see what they say. Most commercial lenders will have some sort of balloon.
@Beth Blank , talk to the commercial lending department of a small local bank that does portfolio lending.
You may need to make 5-10 calls before you identify the right bank.
Ask them what their lending criteria is (LTV, term, rates, reserve requirement, fees, etc)
First . Never say "I can't". Always ask ,,, "How can I make this work".
Second. If you can't finance it alone, then there are options and are a few: Cash-rich partner, Private money(expensive), Dig into your available funds: credit cards, heloc, friends and family.
Third: Yes, you will most likely need a bank loan. Start working on it by making calls and feeling things out. Do not take no for an answer from the first bank. be persistent.
@Beth Blank "The deal of the century comes every other week" :)
Take heart - you are on the right path! Your eyes are open as you are taking active steps. Not many people do that.
There will be many real estate meetups in your area, but you can't attend all of them. I would suggest that you start attending your local multifamily meetups. This will help you connect with local investors, understand what areas/properties they are talking about and what pitfalls to avoid. You will also connect with lenders and brokers. Develop connections with them to further your knowledge. You will be surprised how helpful everyone is.
Look into getting an experienced partner/mentor. They can guide you (the best learning is learning through other people's mistakes), connect you with important local connections as well as partner with you on deals. Keep us posted!
I'm not sure if you wanted to share the info on the unit as you didn't mention in you're post so I will leave that up to you. I'm pretty sure I know exactly which one you are talking about. It's in great area. Ive Been looking in That area for multi units but haven't found anything that cash flows like I want. Shoot me a message and I will let you know if it's then same unit i have looked at. Great building but for me once added taxes, expenses, management and cap x, It didn't need make sense to me. Not sure your criteria but wouldn't mind sharing my thoughts.
@Beth Blank Just as the saying goes " if there is will there is a way " same way in the real estate world if the deal is good there are so many ways to fund it as suggested above so make sure the deal is good and present it to someone .
There are many ways to try and get this deal. When I make an offer it always includes some type of seller financing or seller carry back.
Partnering is always a good way to go. You can find partners through BP or through you local meet ups if they aren't in your network. Also, for the "I can't get a loan" bit, don't sell yourself short. Maybe you can, maybe you can't. Getting a loan on a 14 unit building is often easier than getting one on a duplex. Call and meet with dozens of local banks and credit unions. Call the ones that have less than 10 total locations.