Buying Apartment Buildings: 6 Private Money Sources

You will save a lot of time if you target your marketing to "predisposed" sources of money.If you can find a way to tap into these predisposed sources, you greatly reduce the amount of time you spend trying to bring a multifamily property deal to closure.There are six general sources of funds:

1.

Banks: They are not a private money source per se, but they clearly are a predisposed source for those that are already doing multifamily deals.They are a predominant source of gaining a large portion of your financing on multifamily deals.Banks are going to do at least 80% of the financing for you.

2.Sellers: This one of the most common sources of funding after banks.You should always ask the seller to carry back the second mortgage to remove the down payment requirements.There are four ways to structure these deals.

Second mortgage - always ask the seller to carry back the second mortgage.This lowers the amount you have to find from other money sources.

Seller owns the property free and clear - you should be able to at least get the seller to carry something back, either as a first or second mortgage.Whenever you talk to a seller, it is always important to understand what their underlining debt structure is.Find out what kind of financing is on the property.

Deferred down payment - the ideal situation is buying yourself enough time where you can make improvements and refinance your way out of it.You need at least 12 months to refinance.You can do it sooner.

Lease options - You can buy properties under a leases option as an investor.If you sign a lease on a property as a master tenant, then you can make payments to the owner.You can then sublet to get tenants in the property.You then turn around and have the rental payments cover the cost of your lease payments.

There are also two subcategories of sellers.You can find funding from previous sellers and from sellers obtained from marketing.

Previous sellers - If you have just completed a deal and the seller is walking away with cash in hand, you can take that opportunity to ask them what they are going to do with the money.Inquire as to whether they would like to invest it in another real estate deal.

Sellers from marketing - If you are doing direct mail campaigns to find motivated sellers on houses or commercial properties and you cannot come to terms on one deal, then ask them if they would be interested in other potential deals.

3.Private Investors: You can find these sources through real estate investing events, advertising, auctions and IRA events.Real estate events are a great source of investors because this is where true investors congregate; they are searching for deals.When advertising, do not limit yourself to where you live or where the properties are.Look to California, New York and Florida.People have more money there and are looking for investment opportunities such as buying apartment buildings.

4.Real Estate Brokers: If you have a deal under contract and you are missing some money to make the deal happen, you can either negotiate with the broker to get a deferred commission or even a reduced commission.Do not abuse this relationship because you want them to send you pocket listings.

5.Referrals: This is the single most effective way to get sources of private money.It costs you absolutely nothing and you tend to get better and more dependable clients through referrals than by any other means.

6.You: Yes, you are a source of private monies.This can include home equity, non-recourse loans and reverse mortgages.If you have other properties, you can include equity on those as well.A small business line of credit is a great source for rehab properties.If you are going to be in and out of a deal, you can also look to low APR credit cards.

You now know the six major sources of private money for your multifamily deals.Empowered with this knowledge, you are able to begin creating an investor base that you can tap into for every deal you work on.

About the Author

Lance Edwards is living proof of his mantra that you don't have to "graduate" from single family to multifamily - you can start with multifamily; using none of your own money and not dealing with tenants and toilets.

For FREE information, visit http://www.ApartmentWealthMachine.com.

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