Investing in Multifamilies

[Antwoinne Campbell]

Greetings,

I have an interest in investing in multi-family properties; however, I do not have the capital required for a downpayment of twenty-five percent. I am debating using a hard money lender for the full purchase price or the twenty-five percent downpayment; then cash-out refinancing. I am looking for feedback with this method to start investing in multi-families. Should I use a hard money lender for the full purchase price or down payment, and refinance to repay the lender? Also, what is the process of working with a hard money lender, and what documentation should I provide to the lender when presenting the deal?

[Michael Ealy]

Originally posted by @Antwoinne Campbell:

Greetings,

I have an interest in investing in multi-family properties; however, I do not have the capital required for a downpayment of twenty-five percent. I am debating using a hard money lender for the full purchase price or the twenty-five percent downpayment; then cash-out refinancing. I am looking for feedback with this method to start investing in multi-families. Should I use a hard money lender for the full purchase price or down payment, and refinance to repay the lender? Also, what is the process of working with a hard money lender, and what documentation should I provide to the lender when presenting the deal?

 I have not read all the responses but I've been in your situation before (I lost everything back in 2003 but I was able to get back up and have acquired over 1,800 apartment units since then - and I own about 1,000 apartment units today). So how do you get the capital as downpayment?

1. Since you don't have any experience, I suggest you don't raise private capital yet. You cannot risk other people's money until you know you have the experience and expertise to succeed.

2. Instead of doing it on your own, why not partner with someone who have some experience with multi family? Volunteer to work for free - you can help find the deal and even raise the capital but you leverage on the track record and expertise of the experienced partner.

3. Don't borrow hard money and use that for long term financing. The best use of hard money is when you find a distressed property - 60% vacant, it needs work and then you can buy it cheap. Then use hard money - but even before you do, partner with someone who has done extensive renovations of apartment buildings. After that, you can refinance with long term financing.

4. Be prepared you will not make a lot of money doing 1-3 because the experienced partner will get the lion share of the profits but that's OK: you are getting the experience under your belt and you're building a portfolio of apartment units you can rightfully claim you're a GP (General Partner) on.

5. Once you get the experience under your belt through partnering with someone with experience, then now, you can raise private capital. Don't jump into syndication right away. Find one or two investors who can put up $100,000 downpayment on a deal. Putting up a syndication is expensive for smaller deals. 

Hope the above helps. With enough hustle and patience, you will eventually get to where you want to go.