How to Raise Money for Multi-Family Property Investing

October 16, 2019
by Donald La


Investing in a multi-family property has excellent potential, and it can be one of the best ways for you to grow your investment portfolio. While the benefits tend to be easy to see, there is also one major drawback that keeps many people from investing in these types of properties. These properties tend to be costly because they are much larger than a single-family home. While buying a townhome might be similar to buying a single-family property from a financing perspective, the same is not true with buildings that have five or more units. In those cases, it can sometimes be more challenging to get the money you need.

The goal of this article is to provide you with some information on how to raise money for multi-family property investing the right way. Even though it might appear more complicated, it is certainly possible. The biggest hurdle will generally be with the first property. 


You Could Still Get a Mortgage for Some Properties

Depending on the size of the multi-family unit you are getting and your credit score, you could still use a mortgage. Of course, getting a mortgage will typically depend on your credit rating and the size of the mortgage you will need. For smaller properties and cheaper areas, it might be a viable option for you. Take the time to look at some of the various lenders out there to get a sense of how much you might be able to obtain and whether the terms would be favorable or not. However, you might need to look for other options, such as those detailed below.


Hard Money Loan

Another option that you may want to consider is using a hard money loan. Instead of getting a loan directly from an institution, this type of loan will instead come from an individual. These types of lenders tend to be most concerned with the property and less concerned with the borrower. Credit scores are often not as important with these lenders, as well, which can make borrowing easier for many people. It may even be possible to invest without any of your own money. The loans also tend to be flexible.

While this can sound like a good idea, you will want to look at the interest rates charged for these loans. They might be as much as 10% or more, which could make it higher than what you would like to have to pay back. It is also imperative to keep in mind that these types of loans are generally short-term. The lenders want their money and interest quickly; meaning you need to be very sure that the property will be able to start making money right away.


Taking Out a Home Equity Loan

If you already have a home of your own, and you want to start investing in real estate, the equity in your property can be a fantastic option to use. By taking out a home equity loan, which can be used for many different purposes, you can get the money you need to invest in the multi-family property. Even if you are not able to get the full purchase price of the new property, you will be able to get a large chunk of it, which will help you to reduce the amount that you might need to borrow from elsewhere. This can help make it easier to get enough funds for the new property.


Work With Multiple Investors

You might find that there are some other people you know who are investing who are also interested in owning multi-family properties. If that’s the case, you may want to talk with them about a joint investment. While this might not be a good solution for everyone, it can work out well for many who have similar goals, but who do not have the money on their own to invest. They could invest in one property now and then start to invest in more and more properties as they begin to make more money. If you choose to go this route, you need to be sure that you find people that you trust for the investment, of course.


Friends and Family

Borrowing money from friends and family is not always an easy thing to do, and it has the potential to cause problems. However, those who are sure they have a good investment, and who are sure they will be able to pay their family back on time, and with interest, might want to consider this option.


Liquidating Other Assets

Perhaps you have some other assets that are not helping you make any money. Maybe you have a classic car or a boat that you hardly ever use. They are not going up in value, and they are not doing anything for your investment portfolio. If you have any assets that you no longer want or need, selling them and getting the cash you need to invest in real estate is wise.


Savings and Retirement Money

While you want to make sure that you have a comfortable retirement, you might find that it would be a better idea to take some of that money and invest it in a multi-family property that will be able to provide you with multiple, continual streams of revenue instead. Tapping into your retirement money can be dangerous, so you should only do this when you are confident that you have a quality property that will be able to help you make your money back.

Now that you have a better idea of how to raise money for multi-property investing, you will want to start crunching numbers. Which of these techniques will you be able to use to help you get the money that you need? There are many ways that you can start to invest and become successful with multi-family properties. Get started right now.

Donald La is a certified commercial real estate broker that can guide you in investing in multi-family homes. He has years of expertise in the Los Angeles and San Gabriel Valley areas. Contact Donald for more information.

About the author
Donald La
Donald La