How Do I Get Financing For Apartment Dea...

I get questions about funding all the time. It’s usually about private lenders and cash buyers with regard to wholesaling…

But recently, a student asked me about financing for multifamily apartment complexes. I figured, we don’t talk about this strategy too often so it makes perfect sense to bring it here to y’all for a Mogul lesson.

Hey Moguls, Patrick Riddle here, and I’m going to give you a few more specifics to help us set the foundation before we dive in…

This student told me that his main goal is to acquire apartment complexes throughout the country via banks, asset managers, LoopNet, etc. He said his biggest frustration is that he just can't seem to get the right property with the proper financing to acquire it to actually land the deal.

So, he asked me how to go about finding all the cash that’s needed to acquire apartment complexes and to have a backup financing group or bank that will be there just in case the other bank gets cold feet or changes its mind.

Between You and Me, Tis Private Money

Well, I personally fund my deals solely with private money, or with a mix of seller financing and private money. This is a great strategy, especially to get into bigger deals.

Let’s use this scenario as an example:

You find a large apartment complex and the seller will finance a big chunk of the purchase price. With this being the case, you can bring in a private lender just for the cash needed to do the deal. It can make doing the deal a lot easier.

Here’s another important note…

My student mentioned that his goal is to acquire these through banks, asset managers, or LoopNet… most of those properties are listed through agents and many of them probably do not have the seller financing option.

So, I would suggest getting private money lined up to do the deal. If it's going to be an all-cash deal, then getting a private lender (depending on what kind of purchase price you’re going to have) may require more than one private lender (to get into one of the bigger deals).

Outsmart and Outsource the Competition

You’ll remember that my student said his biggest frustration is that he just can't land a deal…

remote A lot of times, the properties that banks and asset managers have listed (such as LoopNet) are the properties that anyone can easily find. Sometimes it’s better to use strategies to find deals that other people don't know about.

One of those strategies is direct mail. You could get a list of apartment building owners for a specific area, specific size, and number of units. You could even target apartment building owners who have owned their buildings for 15-20+ years, and some of these properties may have a better chance of having equity.

Mailing a list like that - to targeted apartment building owners - would be my strategy.

You know, a good buddy of mine and fellow investor also shared some thoughts with me about this, and I want to share two more important factors for you to consider…

Thing 1: Regional Banks

My buddy told me that he’s heard from those in the apartment-buying business that not only is a combination of private money and owner financing (or bank funding and owner financing) a great model…

But when it comes to the bank-funding piece and lining up your Plan A and Plan B (your backup), often regional banks tend to be a better place to look for that piece.

fire These banks are also called portfolio lenders. Regional local banks and credit unions can often be a good place to source that type of funding for a small- to medium-sized apartment complex. So, make sure that whatever regional banks you have are also on your list.

Local start-up banks are great because they’re often more motivated to be actively looking for more business, so in turn they are often more flexible. And, local banks receive federal credit for lending to the community. It's mandatory for banks to be contributing at a certain level.

Thing 2: Equip Yourself with the Know-How

This second thing my investor friend mentioned was a personal recommendation based on what he’s learned from others in the industry...

He said he learned a great deal from Dennis Fassett (who also happens to be a Mogul Faculty Advisor), who actually has a course on how to buy your first apartment complex. If you're serious about buying your first apartment complex, check out what Dennis has to offer.

Happy multifamily investing…