The real estate market is ripe for the multifamily investor. After decades of commercial real estate entrepreneurs investing in single family residential units, the market has become saturated. With students, families, and professionals looking for rental units with great access to commuter routes, hospitals, corporate parks, and schools, many people are looking to live in multifamily properties. The great news is that any multifamily investor with working knowledge of commercial property financing can skyrocket to the top of the industry.
When shopping around for financing, the successful multlifamily investor should look to see if there are any incentives at a state government level. For the most part, single family properties can get financing based on the buyer’s credit score. Recently, state laws have shifted so that financing for multifamily properties is based on the potential to generate income. Therefore, it is much easier for a multifamily investor to get financing for a duplex, triplex, or even a large apartment complex.
Bringing the seller into the financing
A multifamily investor who is looking to purchase property for renovation and rental might want to consider working out financing directly with the seller. Seller carry financing, where an agreement is worked out so that the owner holds onto the property while the multifamily investor pays off the price and renovates the building is becoming more popular in the commercial real estate market. This can be extremely beneficial because the payment schedule and interest can be worked out to favor all parties involved, with the added perk of the owner helping with the transition – so the multifamily investor can learn from the previous landlord what works, what doesn’t, what needs to be overhauled, and anything else that might otherwise come as an unwanted surprise, later on down the road.
Additional investors and partners
Sometimes a multifamily investor sees a property that has tremendous revenue potential, but the initial purchase price and renovation costs are more than the investor can take on. In these cases, the multifamily investor usually brings other investors or partners on board to structure mezzanine loans, or payments in the form of a percentage of the overall revenue with a partner buy-out price. This way, the investors see a return, rather than having their money tied up in property, and the multifamily investor can get complete control of the property once the rental units start generating a profit.
With many financing options out there, anyone can become a top multifamily investor in a market that is poised for a boom over the next few years.