No Money Down Multi-Family Investing?

Question

We are currently buying lots of single family homes using private money for purchase and rehab costs and then we're refinancing out with bank money at 75% LTV. In short, we're doing no money out-of-pocket investing, and are having good success with it. However, to reach our income goals we will need to look at purchasing chunks of units at a time - buying small apartment buildings.

So here's the question: What are the creative ways to get this done with no money out-of-pocket like we are doing with single-family homes? I often used to say things like "That's impossible!" But over the years I've bumped into people who are doing that "impossible" thing. Basically, I've learned that I don't know what I don't know, so it's best to stay open-minded to avoid boxing myself by holding a rigid belief system that may be something totally self-created. So... any ideas? Thanks in advance!

Joe Fairless · Answer

@Jerry Kisasonak correct if there are rehab costs it would include the costs + whatever the option payment is negotiated at.

Joe Fairless · Answer

@jerry

@Jerry Kisasonak I did my first multifamily deal, a 168-unit, using a master lease and raised the money needed for the down payment. Both of those options (master lease and raising money from investors) are ways to do deals without any of your own money.

Arlan Potter · Answer

@Jerry Kisasonak

We just bought 32 unit complex. actually 8 quads, 6 in one place and 2 in another location.

70% bank, 20% seller, 10% me. and the 10% me actually was from some private investor money that I got mortgaging some of my free and clear rental homes.

So technically 0% of my personal money.

I am like a lot investors, tons of equity - no cash. If I had any cash, it would get spent pretty fast.

Josh Eitingon · Answer

@Jerry Kisasonak, I think that is a good point- most conventional lender will not like seeing a second lien.  That said, for 20-30% of the purchase price I think many lenders would be willing to accept personal guarantees.

You can definitely get creative.  Especially if you are willing to give up a piece of the deal -- which I think long term can be more advantageous as your  investors are seeing you as a successful operator, more likely to invest more in the future..etc.

Jerry Kisasonak · Answer

@Joe Fairless

Thanks! I'm researching ML's now. My main question on them at this point is renovation costs. I assume that would be the responsibility of the Master Lessor? If this is the case, the initial costs would include the option payment and rehab costs correct?

Jerry Kisasonak · Answer

Thanks @Serge S.

I am looking at Ben's website now. Looks like he has lots of info there to go through. Thanks again for the heads up!

Jerry Kisasonak · Answer

Oh Arlan... Did you have a hard time getting the primary lender to accept a second mortgage from the seller? I've had others tell me that they won't lend if there's a second coming behind theirs. Apparently that's not an absolute.

Jerry Kisasonak · Answer

Thanks Arlan... That's the kind of thinking and creativity that I'm looking for!

We are certainly like you. If we have money in hand we ALWAYS find a good deal for it to go to! So we are high equity and low cash capital.

Thanks!

No Money Down Multi-Family Investing?

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