How to finance a multi family (11 unit) using OPM??

Question

What are some of the best ways to finance an 11 unit multi family home that cash flows positively and is 100% occupied using OPM (other peoples money : ) ???

Scott Morongell · Answer

Yes, it sounds like owner financing would be your best bet and leave you with most of the ownership at the end of it. Syndications can be structured in many ways. 2 of the most common ways are a straight split and a preferred return with a split thereafter.

ex 1. 80/20 split (investor gets 80 cents and you the GP get 20 cents)

ex 2. 7 pref with a 70/30 split thereafter (anything over 7% gets split with 70 cents going to the investor (LP) and you the GP get 30 cents)

These numbers can be made up any which way. It all depends how cheap of equity you can attract.

Timothy Howell · Answer

Account Closed Hi Erik, I just ran a rough estimate of numbers for the idea of this property. To be honest the 11 unit is over my head for my first deal. But I have come across an awesome fourplex in an upscale neighborhood in Lexington KY (Booming Spot) so I guess the same learning applies! It does need a little work but I would plan to live in one and possible VRBO the other units. Short term housing is in high demand in Lexington as I have been on the other side of the fence many of times : ) I am currently in NC actively looking and can pass anything on if need. Tim

Account Closed · Answer

How do you know it cashflows if you don't know what the debt service is? You get partners or raise capital. I may be interested if it is in NC/SC

Timothy Howell · Answer

@Scott Morongell Great insight Scott TY I'm not familiar with syndicating real estate, all tho there are plenty of syndications in the racehorse world, so I'm familiar with the concept lol. How are syndications typically structured and obviously I would have to build the network to invest into a PPM correct? Owner financing could be my winning ticket here, Is it a common scenario for the owner to leave 25% in and finance 75% with a lender?

Timothy Howell · Answer

@Greg Dickerson Thanks Greg, two great options, probably my best place to start. What would underwriting want to see on my behalf if I was to combine private money with bank financing?

Timothy Howell · Answer

@Jason DiClemente Hi Jason, yes I'm looking for creative ways to finance with as little out of pocket as possible and plan to live in one of the units. I've heard there are some great ways to piece this puzzle together!

Scott Morongell · Answer

@Timothy Howell depending on where this deal is located you could possibly syndicate it... however I doubt the price per door would allow for such an expense. Will the OPM be involved and considered and active investor? If so, you could get an operating agreement drafted for much less than what a PPM would run you if you were to syndicate it. For the debt side, a local bank could be your best bet. You should know by now is owner financing is in the mix. Always ask, why are they selling? and what are they going to do with the money? If he's retiring and going to sit on a pile of cash, then owner financing becomes very attractive for him.

Greg Dickerson · Answer

You could use owner financing and or private money to reduce the loan to value to get a bank loan.

Ryan Larsen · Answer

@Greg Dickerson Hey Greg can you elaborate on the mix of seller financing and bank financing?

Greg Dickerson · Answer

You could ask for owner financing, borrow private money, and or combine these with bank financing.

How to finance a multi family (11 unit) using OPM??

Most Popular Reply