When investing in a prime multifamily real estate, it’s important to form a financing team to help you through the process of gathering the needed funds for purchasing apartment complexes.
Before that, let’s look at the reasons you need to build such a team in the first place.
If you want to create a syndication, it’s important to consider all the tasks that are involved in such a setup. You will need to create specialized teams that are capable of handling the different aspects of the investment.
There should be teams that are delegated to perform tasks under these categories:
- Multifamily underwriting
- Legal
- Equity
- Property management
- Acquisition
- Finance
While each team handles different sets of responsibilities, your financing team is the most crucial since it enables all other activities down the line. After all, you will need to raise as much funding as possible in order to purchase a multifamily property. In a way, we can say that your financing team pumps fuel into your investment. Without a financing team in place, you will be hard-pressed to look for funds from other sources, which is impossible considering that multifamily properties don’t come cheap.
In this case, it’s essential to create a productive and effective financing team that can help you secure the funds needed to close a deal. You won’t have to look far. It’s only a matter of searching for the right individuals and institutions. Here’s a list of the most important ones.
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Personal investors
Believe it or not, but the first time I started syndicating in the multifamily sector, I didn’t get my initial loan from a bank. Instead, it came from a close relative of mine who gave me a little capital. It’s okay if you have minimal knowledge about real estate investing. You need a good starting fund so you can start building your investment from the ground up. Aside from family members, you can also invite friends over to become a part of your financing team. However, it’s important to keep in mind that conflicts may arise, especially when personal investors are asking you to pay up. Your relationships with your family and friends are affected if you allow issues over money to interfere.
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Lending institutions
If you are not planning on borrowing funds from people who are close to you, you can always ask to borrow from banks and lending companies that specialize in the multifamily sector. Finding one isn’t actually a problem. When my partner and I started out, finding banks that would lend us money was hard. It was during an economic downturn in 2008 that lending institutions got stricter. Fortunately, we were able to find banks that offered loans for multifamily real estate. It’s only a matter of forging good relationships with these banks that can approve your loan applications with no issue. To do that, you only need to present your business plan and specify the goals (both short and long-term) you want to accomplish.
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Mortgage brokers
Ever since I started in the multifamily investing arena, I have had 26 syndications already. As time went by, I was able to learn a lot more about the sector, which allowed me to explore more strategies and areas that are valuable to the business. For one, getting the right mortgage brokers for my team provides me with greater leverage. They are able to present your business in a way that impresses lenders. They write incredible stories that convince lending institutions to approve mortgages faster. Apparently, you may want to include these brokers in your network and, eventually, your financing team.
As you can see, building a financing team is very easy once you know where and how to start looking for the right people and institutions. If you’re starting out as a multifamily syndicator or an investor, you can use this guide to gather the right funds for your business plan.