8 Ways To Buy Multifamily Property With Little or No Money
1. Private Money
Private money loans are an increasingly popular means of purchasing multifamily properties with no money down.
Private investors, lending to borrowers they trust, provide private money loans in a much faster timeline than traditional routes like banks.
By partnering with private lenders, buyers can avoid making a large down payment and instead can pay private lenders a higher rate of interest in return for funding.
They also have the ability to structure unique loan terms that may fit their individual situation better.
Buying multifamily property with private money is becoming a popular choice for investors looking for speed and flexibility when acquiring their next project.
2. Equity Shares
Equity sharing allows multiple investors to pool their resources, allowing them to access larger investments than they would be able to on their own.
Essentially, each investor buys a share in the property, taking on proportional ownership and liabilities without any down payment.
You will still need to provide financing for closing costs and other incidentals associated with buying property, but the lack of a large initial investment makes this route an attractive option for those who want in but don't have the money upfront.
And when you get returns from your share of the total rent payments collected from tenants, it more than makes up for not having made a straightforward down payment.
Equity shares can give you access to a larger piece of the real estate pie and help you build wealth by investing in rental properties with minimum capital outlay.
3. Material Sales
Buying multifamily investment property with no money is also possible through material sales.
Rather than making a large, upfront cash payment to purchase a multifamily investment property, potential buyers can take advantage of the homeowner's insurance market.
Contractors and subcontractors may seek building material suppliers who will agree to long-term contracts that allow the buyer this option.
The supplier receives payments once the multifamily investment property has been repaired or remodeled using materials supplied by them, and the contractor or subcontractor profits from any remaining difference as well as equipment and labor used for completion of the project.
This benefits all parties involved as it eliminates any need for an upfront payment by the multifamily investor.
With proper research into building material suppliers and their policies regarding material sales, multifamily investors have a viable means of buying multifamily properties without having to pay out money upfront.
4. Hard Money Loan
Hard money lenders base their lending decisions on the property's after-repair value which allows them to take greater risks than traditional banks.
This means that hard money lenders can help you finance an otherwise hard-to-finance deal where conventional lenders may be hesitant.
By using hard money loans, you can avoid tying up your own money in the asset, allowing you to use it toward other investments or expenses.
Ultimately, hard money loans are a great option for those interested in multifamily property and investors who don't have a substantial amount of cash saved for a down payment.
5. House Hacking
House hacking utilizes rental income from the additional rental units to subsidize your mortgage, helping you achieve homeownership without a personal down payment.
With house hacking, one can purchase a multifamily rental property and then rent out one or more of the rental units.
This rental income can be used to cover much of the monthly mortgage costs and taxes associated with owning rental property which makes house hacking an attractive option for those who may not otherwise have the financial resources needed to purchase a multifamily rental property.
6. Real Estate Crowdfunding
Using real estate crowdfunding platforms, real estate entrepreneurs can leverage the resources of many simultaneous investors in order to purchase real estate with no money upfront.
Through targeted investment pools and well-defined investing projects, real estate investing no longer needs to be confined exclusively to those with a hefty bankroll.
For savvy real estate investors looking at ways to increase their return on investment (ROI) while minimizing their financial risk, real estate crowdfunding offers an excellent opportunity for success.
7. Seller Financing
Seller financing may be one of the simplest ways to buy a multifamily property with no cash upfront.
Instead of relying on cash or borrowing from a bank, seller financing enables the buyer to leverage their cash flow in order to purchase the asset.
This approach can provide an ideal solution for both buyers and sellers since it eliminates the need for large outlays of cash and facilitates faster deals than traditional bank loans.
Buyers should be sure to explore terms such as interest rate, length of the loan, and payment schedule that suit their budget needs.
8. Partnerships
With this strategy, you can acquire a multifamily property with the support of a partner or group of partners.
By leveraging each other's resources, partnerships can produce higher returns than if you were to attempt the same purchase solo.
Investing in multifamily properties as partners also reduces the risk for everyone involved, since the burden is easier to handle between multiple individuals.
The Bottom Line
If you want to buy a multifamily property but don't have the necessary funds, there are multiple options available to you.
Utilizing partner financing, hard money loans, or self-directed IRAs can help take the financial burden off of your shoulders and allow you to become an investor.
Buying a multifamily home can be an attractive option for many potential buyers given its benefits such as increased income opportunities and greater convenience.
With the right strategies in place and strong financial planning, anyone can become a successful real estate investor even with especially little capital, to begin with.
Investing in multi-family housing is a risky endeavor but ultimately can lead to rewarding results if done with care.
Although the process of buying a multifamily property without money is not without its challenges, it is still possible - and likely successful - if managed wisely.