Hello,
I am looking into buying multifamily properties as investments. My broker said minimum down payment would be 20%. I want to minimize my down payment obviously. Any suggestions?
Have the seller carry all, or part of it, against another property you own; makes no difference if the other property has the face value of the equity/down payment, or not. Some lenders will accept the seller carry against other property, others won’t.
Other variables include the performance of the property, and your own liquidity. It’s hard to get good financing if ALL your money is buried in a down payment.
Ask your mtg. broker what you need and then work it out.
As an aside, just to confuse the issue a bit, taking title Sub2 up front, will bypass the need to get a new loan, and give you time to season the investment and qualify for new financing …as a refi… instead of a new purchase money mortgage. This has been part of the master lease option strategy.
Ask your broker about the prospects of refinancing a property as an owner, as opposed to getting new financing up front.
You would likely still need to give the seller ‘some’ money, since you aren’t cashing out the existing financing. It’s worth a try, and expedites the transaction like you can’t imagine.
Yes, the seller has to wait for all his money, but if the project isn’t performing well, and can be made to perform later, this is a great move, and will make your financing that much cheaper, both in the short and long runs, all things being equal.
FWIW
Option #1: Negotiate a separate installment plan for the down payment. Negotiate a separate installment plan for the down payment. Sometimes the seller will allow you to pay the down payment on a monthly basis.
Option #2: Trade something other than cash. This could include land, a car, a boat, jewelry or valuable collectibles. Find out what they want and need. Maybe you have, or can get, just what they are looking for. You could also trade services such as carpentry, auto mechanics, painting, dental work and other services that you can do for the seller over time.
Option #3: Apply for a loan assistance program. Talk to your bank, many lending institutions offer programs that allow buyers to put little to no money down on real estate purchases.
Option #4: Find an investment partner. Look for an investment partner who will put up some or all of the cash in an equity-sharing partnership. You make the monthly payments and the two of you split the eventual resale profits.
Option #5: Get owner financing or a land contract. Another option is to have the seller act as the bank. You make your payments, including interest, directly to the seller. Then after usually 3 to 5 years you make a lump sum payment to the seller. During this time, you should have enough equity to qualify for a standard bank loan.
Option #6: Use a home equity line of credit from another property. If you have equity in another property, you could use that equity as a down payment on purchasing another investment property.
John hit the nail on the head. You have to get creative and nowadays sellers are open to creativity as long as its decent on their end. 20% is a nice lump sum to risk. :banghead