Passive income sounds pretty sweet, right?!
Whelp, you probably already know that investing in real estate gives you the opportunity to build a diversified portfolio, protect against inflation, and increase your retirement savings. All great, yay!
But, if you’re interested in earning passive income from your real estate investments… perhaps you should think about investing in multifamily properties.
Keep this in mind, though: While multifamily investments can be great for your portfolio(!), they’re also more expensive than single-family properties.
So, if you’re wondering how to buy a multifamily property with no money, there are many awesome techniques we think you should consider.
Let’s get it…
Can You Buy a Multifamily Property with No Money?
Ok, even though multifamily properties cost a considerable sum of money, you can still purchase them without having cash on hand. Truth!
But, you’ll need to be creative...
Depending on the technique you end up using, you must find alternative funding sources.
6 Ways to Buy a Multifamily Property with No Money?
Here’s the goods…
There are 6 methods to buying a multifamily property with no money… yep, these strategies allow you to acquire this type of rental property without spending any of your own money.
#1. Partner with another borrower: Partnering with another borrower is the most commonly used option by investors who want to know how to buy a multifamily property with no money.
You need to partner with someone who can give you the money needed to invest, while also helping you secure financing for the remaining costs. This person can be a friend, investor, or family member.
Then, once you acquire a multifamily property with a partner, you’ll split profits and ownership. The partner, for example, could take care of the down payment costs, and real estate agents can help you connect with investment partners who are able to finance this type of purchase.
#2. Explore seller financing: The second option happens when you receive a loan directly from the seller, who owns their property free and clear. In this scenario, the seller sets the loan terms (basically acting as a bank), so be extra careful before using this technique — always have an investor-friendly attorney review any terms, agreements, and contracts.
If the owner in question is truly motivated to complete the sale, they just may be willing to explore this good option.
#3. Cash-out refinance: If you own a home with a considerable amount of equity, you may be able to pay the down payment for a multifamily property by getting a cash-out refinance on your home. Obviously, make sure you qualify for this loan before starting the process.
If you’re thinking about taking out a cash-out refinance, keep in mind that this option can be risky if home prices in your area are falling…
Let’s say that you get a large refinancing on your property… if the property starts decreasing in value, you might end up underwater before you’ve repaid the loan. Eek.
#4. Use a hard money loan: While there are some advantages of a hard money loan, you should only use this option if you’ve exhausted all other options. So, fair warning.
A hard money loan is a type of short-term loan that will be secured by the property as opposed to your own finances. In most cases, these loans come with high interest rates.
Now, there are benefits of this method: a quick approval process and very little documentation.
Hard money loans are most often used by investors who know how to fix and flip properties quickly. While it’s possible to be approved for hard money loans that would cover 100% of the multifamily property value, this can often prove to be a challenging task.
#5. Assume the seller’s loan: Ok, the 5th and final option at your disposal involves assuming the seller’s loan. If the seller is still paying off a loan on the multifamily property, you can take over their interest rate and the loan payments. You may be able to benefit from a lower interest rate than you would typically receive.
While loan assumptions can be awesome, they might not cover the current asking price for the property in question.
#6. House Hacking: Ever heard of house hacking? If not, it’s a real estate investing strategy where you rent out part of a property you currently live in. In the case of multifamily properties, you can do this one of 2 ways.
You can rent out a portion of your current home — or use Airbnb— to help save money for a multifamily property. Or, once you first purchase a multifamily property, you can rent out the upstairs or downstairs portion, or even a spare room, to help cover the cost of the monthly mortgage. rent a spare room using Airbnb.
To do this, keep in mind that you’ll need to familiarize yourself with your city’s rental and sublet laws first.
Pros to Buying a Multifamily Property with No Money?
Alrighty, now that you understand how to buy a multifamily property with no money, you should definitely weigh the pros and cons.
The main benefits of buying this type of property with no money include:
- More flexibility with your purchase
- Less borrower scrutiny
- Allows you to earn passive, rental income
- Helps you avoid high up-front costs
- Tax deductions, ranging from insurance, maintenance, property management, and more!
Cons to Buying a Multifamily Property with No Money
While there are many awesome reasons to buy a multifamily property with no money, there are also a few drawbacks:
- Some methods are difficult to implement
- High competition
- Risks may be higher
- May require the need to hire a property manager, which can reduce your return on investment
- More challenging to calculate returns
Final Thoughts About How to Buying a Multifamily Property with No Money
Ok then, whether you’re thinking about taking out a hard money loan or assuming the seller’s loan, there are many ways to buy a multifamily property with no money…
You’ll keep your up-front costs low, while gaining ownership of a property that should help you generate positive cash flow. $$!
Now, consider all your options to find the method that best works for you to buy a multifamily property with no money.
Happy Investing!
