If becoming a residential real estate investor or being a landlord sounds like an exciting opportunity, then owning property is a must. For some people, buying a multifamily property is a lifelong dream. What those people may not realize is that their dream is a lot more attainable than they might think. You don’t have to be a billionaire to purchase the ideal multifamily property. In fact, if you know how to play your cards right, you can achieve your goals with little money in the bank, or even no money at all. Here are 6 strategies that might help.
Work With a Private Money Lender
Private money lending is a great way to fund ambitious investment ventures. This strategy involves an individual getting a loan from a small investment business or a private investor rather than a bank or major lending institution. This type of investor might offer a hard money loan or bridge loan. These are short-term loans that can offer quick financing solutions for real estate investors. Lenders of this type tend to focus on the earning potential of the deal rather than your credit history, and some require low down payments or no down payment at all.
Alternately, you might find a private money lender you know personally. Make a list of individuals who might have the funds to contribute to your investment. These can be family members, friends, colleagues, or mentors. Before reaching out, consider your personal relationship, their investing history, and how much money they may have to offer. All these factors can help you decide which individuals might be most likely to help. In return, you can offer them the opportunity to enjoy a high return on investment.
Invest in Duplex Housing
Certain types of multifamily properties come with different regulations or benefits that may make them useful investment options. For example, you might consider duplex housing, which is a house that includes two apartments for separate families. These types of residences often are two stories with one apartment on either floor. Duplex housing, paired with an owner-occupied rental strategy, can make the investment eligible for a Federal Housing Administration (FHA) loan. This is a mortgage loan option backed by the government that can make it easier to purchase a multifamily housing option for very little money.
An FHA loan can help you qualify to purchase the property with a credit score as low as 500, making it ideal for those hoping to buy a multifamily property for little or no money. Other financial benefits include down payment options as low as 3.5%, flexible co-borrower income approval opportunities, and a debt-to-income ratio that is above 50%.
Work With an Equity Share Investor
Working with an equity share investor is another useful lending option for individuals hoping to purchase a multifamily home. This partnership involves offering the investor equity shares in the property in return for upfront down payment funding. For example, if you offer an equity share investor a 30% share of the property equity in return for the initial loan, that investor is entitled to 30% of the monthly income you receive from property residents and 30% of the final property sale value.
The opportunity to receive both short- and long-term returns on investment can be a powerful incentive for equity share investors. It also forges a partnership between you and the equity investor, based on a shared financial interest in the property’s success. These both make equity share investing a useful option for financing your real estate investments.
Form a Real Estate Partnership
This strategy involves teaming up with another real estate investor to finance a multifamily property purchase. You can form a strong team by finding an individual whose investment strengths complement your own. They might, for example, have more available funds for the investment, while you might have more investment experience or time to manage the property. Other elements to consider when picking an investment partner include your personal relationship, their investment history, their reliability, and what support network you each have to fall back on for assistance.
Upon finding a partner, have a conversation to establish your expectations, then write them down for record-keeping purposes. These expectations might include the financial contribution of each person, joint decision-making strategies, and long-term goals for the property. As partners, you’ll then navigate the initial costs, property management, monthly income, and final property sale process as a team. To form a real estate partnership, you’ll also have to file Form 1065 with your tax returns to signify an entity-level tax return and report the income level of both you and your real estate partner with a K-1 form.
Use Real Estate Crowdfunding
Real estate crowdfunding involves using the internet and social media to join forces with fellow investors. In these cases, a group of individuals pools their money together to buy a property. This can be an excellent way for individuals to explore real-estate investment without a significant financial contribution. To get involved with real estate crowdfunding, you can find an existing campaign to join. This option may work well for those who’d like to invest quickly with minimal work. Alternatively, you might organize a new crowdfunding campaign. This takes more work but may give you greater control over the project.
Pull Funds From the Property
Sometimes, a property might contain items or natural resources you can harness and sell for profit. Alternately, consider investing in a property that needs repairs. You can perform a home inspection and make a list of areas that require repair, refurbishing, or replacement, then make a deal with the seller to reduce the final price according to these costs. Then, you can perform the repairs yourself or use discounted services. Both these strategies may help reduce your initial down payment. You can also combine this strategy with previous tactics to make your next real estate investment with no money.
Need More Advice About Residential Real Estate Investment?
At Titan Funding, we understand that owning a multifamily property is exciting and can make good business sense. Individuals interested in real estate investment trading can enjoy benefits like easy management, increased cash flow, and tax breaks. In addition to the six strategies listed above, there are plenty of other actions you can take to make your business venture a success. Contact us today for further advice and assistance.
We are ready to support you in your dream of becoming a residential real estate investor. Give us a call Monday through Friday from 9 a.m. to 6 p.m. Eastern time, or contact us through our website. Our knowledgeable team members are ready to get you help with the next stage of your investment journey.