While only about 6% of Americans have a home that’s worth more than $500,000, the best investment properties are multifamily properties. These often cost more than that and are usually reserved for people who have a lot of money to put down. If you’re looking to buy multifamily property with no money down, you’re going to struggle to find the money you’re looking for.
Thankfully, you can pursue one of these four paths to get a multifamily property whatever your financial situation is.
1. Have You Thought Of a Duplex?
If you’re looking to get a multifamily unit but you don’t have money, one of the best ways of paying for it is to let it pay for itself. A duplex doesn’t fall under the same kind of investment considerations that a large apartment building does. When you invest in a duplex, you get the chance to apply for an FHA loan.
This means that if you’re going to be occupying the space anyway, you can get it for the price of a home loan.
With this kind of loan, you don’t need to put nearly as much down as you need to do for a larger property. Some FHA loans allow you to get a property for as little as 3.5% down. That means you could get a $300,000 property for just over $10,000 down.
This opens up some major doors for you when you’re looking to get a place to start your investing career. Most places want 20% to 30% down, which is all the more reason to get an owner-occupied building.
Just be sure that you’ve got enough put aside for the insurance payments you’ll need to be making.
2. Find an Equity Share Investor
If you find the ideal multifamily real estate investment property, you don’t have to put down as much as you’d think. When you get an equity share investor to help you out, they’ll own the equity in exchange of giving you the money to purchase the building.
If they give you $100,000, you could give them a portion of the equity in exchange. It really depends on the value of the property but just make sure you hold on to more than 50% of the property so that you get to make the final decisions.
When the building makes money, the share investor is entitled to a portion. You need to write out an agreement in advance but the typical portion is related to the percentage they advance you.
When you decide to sell the property, they get to make that percentage back. If the property ends up being valued at twice what you bought it for, everyone ends up making double of whatever portion they invested at the start.
Investing is a great way for people who are cash rich but time poor to make some extra money. The income comes in passively and can end up jumping by leaps and bounds before you know it.
3. Consider Real Estate Syndication
Another great way to end up in possession of a multifamily property when you don’t have a lot of money is to get into real estate syndication. Under these terms, a group of investors comes together to finance a property. This typically takes the form of a real estate partnership or else they end up looking more like a case of real estate crowdfunding.
When you get into a real estate partnership, you’re getting together with a real estate investor with money to spend on properties. The partnership means that you could come together with the capital you have and split the equity accordingly. You can still apply for a loan in this case, but it’ll be the other investors in your partnership who probably end up having to put money down.
Real estate crowdfunding is a more recent development in the world of buying multifamily properties but it helps more people get what they need. You can get together with other prospective owner-investors who want to get a bigger investment property than they can afford individually.
If you get together in a large enough crowd, you could put down just a few hundred dollars and get a passive income from your investment. The more you put in, the more you’ll get out usually. You could be the one to organize the funders and then handle the investing or you could be a passive earner.
4. Borrow From a Hard Money Lender
Rather than going through the expensive down payment process of trying to get money from a bank, hard money lenders are a good option. They’ll be most focused on how much your investment can make, not so much how much money you have. They’ll eschew your credit score for the sake of hard numbers around how much the region can make.
You’ll get a better deal with hard money lenders because they won’t require a down payment. You need to make sure you hunt down the perfect property however because the only reason you’ll be able to get a lot of money is if it’s valuable.
Expect to face some higher interest rates overall. You might have to deal with a shorter amortization period as well, which could be a challenge. If you’re looking for a multifamily property with no money, this is just one of the concessions you’ll have to make to reach your goals.
Do some research for more about what apartment building financing looks like for investors like you.
Buy Multifamily Property With Assistance
If you’re looking to buy multifamily property, get some assistance from someone who wants to invest with you. While you might be averse to partnerships, investing in your first major property is much easier when you have other investors in your corner.
Be sure to check out our guide for how the tax law is changing so that you’re prepared to make the most out of your investment.