How We Bought a 24-Unit Apartment Building for Almost No Money Down: A Comprehensive Blueprint

Embarking on the journey of real estate investing can be daunting, especially when faced with the challenge of amassing a substantial down payment. However, unconventional financing strategies, such as owner financing, seller financing, and creative deal structuring, can pave the way for acquiring income-generating properties with minimal upfront capital. In this article, we will delve into the intricacies of these financing techniques and recount our firsthand experience of purchasing a 24-unit apartment building with a negligible down payment.

In traditional lending scenarios, buyers rely on banks or mortgage companies to finance their property purchases. However, owner and seller financing deviate from this norm by allowing the seller to act as the lender.

Under owner financing, the buyer enters into an agreement with the seller to purchase the property over a specified period, typically with monthly payments. This method offers several advantages:

How We Bought a 24-Unit Apartment Building for (Almost) No Money Down: A BiggerPockets QuickTip Book

by Brandon Turner

4.1 out of 5

Language	:	English
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• Lower Down Payments: Sellers are often more flexible than banks and may be willing to accept a down payment as low as 5-10%.
• Flexible Terms: Owner financing arrangements can be tailored to suit the buyer's financial capabilities, with customizable payment amounts and interest rates.
• Relationship Building: Engaging directly with the seller can foster a mutually beneficial relationship and potentially lead to future investment opportunities.

Seller financing operates in a similar manner but with the added stipulation that the seller retains the title to the property until the loan is fully paid off. This provides an additional layer of security for the seller, ensuring that the buyer maintains the property in good condition and makes timely payments.

Beyond owner and seller financing, creative deal structuring can further reduce the upfront investment required. One such technique is the "Subject-To" financing method.

Under a "Subject-To" agreement, the buyer assumes the existing mortgage on the property, with the original lender's consent. This allows the buyer to acquire the property without refinancing, potentially saving thousands of dollars in closing costs and prepayment penalties.

Another creative approach is the "Wrap-Around" mortgage. In this scenario, the buyer obtains a new loan that encompasses both the existing mortgage and the seller's remaining equity. The seller receives regular payments from the buyer, covering both the original mortgage and their equity portion. Wrap-around mortgages can provide sellers with a steady stream of income while simultaneously enabling buyers to secure financing with favorable terms.

Armed with the knowledge of these financing strategies, we embarked on our mission to acquire a 24-unit apartment building in a thriving urban market. The property was valued at $2.5 million, and we were determined to minimize our down payment.

After extensive research, we identified a motivated seller who was open to creative financing arrangements. We proposed an owner financing deal with a down payment of only $50,000. The seller agreed, impressed by our business plan and our commitment to responsible property management.

To further reduce our out-of-pocket expenses, we employed the "Subject-To" financing technique. The existing mortgage on the property was approximately $1.8 million, with an interest rate of 4.5%. We successfully obtained approval from the original lender to assume the loan, effectively reducing our monthly payments and freeing up capital for operational costs.

Negotiating a complex real estate transaction can be a protracted and arduous process. It took us seven months of persistent communication, diligent due diligence, and unwavering determination to finalize the purchase agreement.

Throughout the journey, we encountered setbacks and challenges. The property required extensive repairs, and we had to negotiate with various contractors to secure the best pricing. We also faced delays in obtaining necessary permits and inspections.

However, we remained steadfast in our pursuit, drawing upon our knowledge of financing strategies and our unwavering belief in the potential of the property.

After countless hours of hard work, we closed on the 24-unit apartment building for a down payment of just $50,000. By leveraging owner financing, seller financing, and creative deal structuring, we were able to acquire a substantial income-generating asset with minimal upfront investment.

The monthly rental income from the property far exceeds the mortgage payments and operational costs, providing us with a healthy cash flow that we can reinvest in additional real estate ventures. The strategic financing we employed has paved the way for financial freedom and a secure future in real estate investing.

Acquiring real estate with minimal money down is not a pipedream but a tangible reality that can be achieved through a combination of knowledge, creativity, and persistence. By exploring unconventional financing strategies such as owner financing, seller financing, and creative deal structuring, aspiring investors can unlock the doors to financial success in real estate.

Embracing the principles outlined in this article, we were able to navigate the complexities of a multi-unit apartment building purchase with a negligible down payment. Our journey serves as a testament to the transformative power of strategic financing and the unwavering belief in one's dreams.

How We Bought a 24-Unit Apartment Building for (Almost) No Money Down: A BiggerPockets QuickTip Book

by Brandon Turner

4.1 out of 5

Language	:	English
File size	:	876 KB
Text-to-Speech	:	Enabled
Screen Reader	:	Supported
Enhanced typesetting	:	Enabled
X-Ray	:	Enabled
Word Wise	:	Enabled
Print length	:	17 pages
Lending	:	Enabled

FREE