There’s a lot that goes into starting a successful real estate empire, one of which is financing it. Multifamily apartments is a great way to get into real estate investing and generating significant income quickly.
It’s recommended to start out with duplexes (2 units) or multifamily units up to 4 because the financing process is similar to that of single family and primary homes and multifamily apartments containing more than 4 units are considered commercial properties.
How you gain financing for your multifamily apartments mostly rely on how you intend to use the property. Traditionally financing is done through a loan from a bank or credit union but there are other options. Here are three perspectives to consider when financing a multifamily apartment.
Owner Occupant
If you plan to live in one of the units while generating income from the other available units you have two options: FHA Loans and VA Loans. FHA (Federal Housing Administration) Loans generally have lower interest rates and less stringent requirements than other loans while only needing borrowers to provide 3%-5% for a down payment. VA Loans are for current or former members of the US Military. They are the best option for military families as there is no minimum credit score required and they come with low interest rates and lower closing costs.
Investor Only
If you do not plan or wish to live in the multifamily apartment, conventional loans are available. They typically require large down payments, ideal credit scores and income assessment. Conventional loans for investment only purposes do cap out: $620,200 for duplexes, $749,650 for triplexes and $931,600 for multifamily apartments with four units.
Other Financing
There are many other ways to finance your new real estate ventures such a hard money loan, rental income (leveraging signed leases as payment), crowdfunding and seeking personal and private lenders and investors.
Contact Growth Capital Team today to explore financing solutions for your business.