How to finance a 9-unit apartment building

Question

Hey guys! I'm currently managing a 9-unit apartment building for the owner. I am interested in buying it but don't have a ton of cash at the moment. We've agreed to a price of 375k. How would I be able to get financing for this? Is there a way I can get an 80% LTV loan and use a hard money lender for the down payment? I really am not sure how I can get in on this deal but it's a VERY good deal. Any help would be much appreciated!! Thank you.

Bjorn Ahlblad · Answer

Account Closed Lenders have tightened up especially on residential over 4 units. The hard money down won't work. You have the advantage of knowing the property and the owner; sell him/her on the idea of 'seller  finance'. Pay them back over time, the owner can carry for a year or two or longer if they want. An installment sale eases his/her tax burden, and gives you time to raise rents and work up a down payment. See if you can increase your knowledge on that aspect of a deal and work on a pitch. All the best!

Evan Polaski · Answer

Account Closed, I agree with Bjorn that a hard money lender generally won't want to take a second position, and a bank won't allow you to borrow your down payment in that sense. Finally, most commercial lenders I have dealt with are not doing 80% LTV.  I am seeing 65-75% as the norm these days.

Seller financing is likely going to be your best bet.  Another creative option would be a preferred equity position, where you are offering an equity investor a higher rate return (say 6-8% current interest rate) with some additional upside when you take them out, say, 12% cumulative IRR.  Ultimately, you are getting the deal done, and have a known cost of capital for both a current rate and overall.

Ryan Hayhurst · Answer

@Nigel Everett McGill

Have you considered bringing in a partner?  I’ve looked at multi families in Indy but have never pulled the trigger.  Send me a message if ﻿you want to discuss further.﻿

How to finance a 9-unit apartment building

Most Popular Reply