A creative financing option available to apartment and hotel complex owners is leasing space in a multi-family housing development. By working as a property manager in a multi-family housing development, you can earn a steady income and become part of a thriving community.
Why lease space? Relying on rental income from multiple units increases your chance of being recognized by residents, who may or may not approve of your management style. You also receive the benefit of lower bill payment fees, which can save you substantial amounts of money over the long term.
Leasing space can be cost effective for small to large scale operators. The average size complex managed by one person needs to be taken into account when looking at how many units you want to lease.
This article will discuss ways for business owners to take advantage of the leased space model for their projects.
Use principal payment forgiveness programs
Many apartment and hotel complex investors use room-for-rent forgiveness programs to help lower their overall debt. In these forgiveness programs, the investor assumes a certain amount of debt responsibility and payment when they buy a unit or apartment, and then removes that responsibility by letting the owner or landlord make monthly payments on your behalf.
This is great for two reasons: first, it reduces your total monthly debt repayment, and second, it gives you more time to save up sufficient funds to meet your needs.
These forgiveness programs are very common among multi-unit property owners, so you will not have much difficulty finding a unit or apartments that can be made into a forgiveable balance.
Invest in distressed properties
If a property is in need of significant upgrades or repairs, it is recommended to invest in it through a distressed property purchase. This means that you buy the property at an extremely low price, but you have to go through a process called re-accommodation.
This process requires you to work with the landlord to come up with an acceptable solution for repair and upgrades, and then both you and the landlord agree on how much this should be worth.
When doing this, it is important to find a place where you can put your faith in the property. If there are problems with the property, someone will know about them and take steps to fix them. You want that person to be you, because then you get what you want.
Also, when investing in these types of properties, be sure to cover your own liabilities. In this business, people make mistakes and eventually they will took your money but nothing else.
Look for creative mortgage options
Many loans are designed for property owners with very little cash flow who are looking to leverage their property investment income. These loans require a high down payment and low debt to live ratio, which makes them very attractive for investors.
If you have a lot of property equity in your building, these kinds of loans can be quite powerful. If you have low debts but a small amount of property equity, this kind of loan can be the perfect match.
However, watch out: Though these kinds of loans may be attractive, they can also be costly. Consider whether you want to cover any negative cash flow with the rest of your finances or if other financing options will work better for you.
If other lenders cannot make suitable deals with you, look for ways to cover negative cash flow and debt using creative financing strategies such as investment financing or investing in yourself.
Seek capital contributions from tenants
Once a building has been constructed, it is time to find new tenants. It can be difficult for a small business with limited resources to attract and retain qualified applicants.
It can be cost-effective for an investor to seek contributions from current tenants. Seek out those who are willing to pay higher rates or who can benefit from the space you have available.
For small businesses that cannot afford a large capital investment fee, look for ways to invest your money. Investing in real estate is not free, but it can be very profitable.
Consider donating space or offering special privileges to new applicants. Doing these things will help grow the community and add value to the property, which will hopefully return some of the rewards to the owner!
Surprising fact: The majority of investors do not know how much it costs to acquire and/or manage a commercial property.
Try lease options with the future tenant
In certain situations, a tenant can offer to sublease their space to an investor, who lives by the rule of paying a reasonable amount for the space they occupy and operating as a landlord with respect to maintenance and upkeep.
This option is usually not an ideal solution for someone looking to own their space, as it can be hard to maintain a large residence alone. However, as an investor, you can offer very low-cost leases that are monthly or annual, which makes them very attractive to potential tenants.
It also gives you the flexibility to change or end your lease at any time, which is great when things are going well but also when there is need for financial help. It also allows you to help yourself financially by avoiding large debtors and landlords alike.
If you are interested in this scenario as an investor, try looking into lease options with the future tenant and/or try offerring a buyout with your current tenant.
Apply for grant money for building improvements
Building owners can apply for a variety of grants, money from the city, state, or even from private sources such as charity auctions and sale events. Many of these grants are for renovations to existing spaces or to add new space.
saturation point for building investors is around $500,000-600,000. If you can raise enough money to get your project fully funded, you will reach your goal! But if you need to fundraise some more, create some momentum by opening new donors and reaching out to old donors.
If you are able to attract enough funding from individual contributors and building owners, then your project will be finished with quality and timely funding. Only have half the amount needed because of funding restrictions? No way! It takes time to gain new contributors and funding doesn’t come until the end of the project.
Consider tax deductions and credits
If you’re a wealthy person, you can consider paying lower taxes as an investor in a property adjacent to your home. This is known as the tax deduction and credit for your property investment.
There are several ways to get a tax deduction and credit for your property investment. The most common way is through a homelocall fund. With homelocall funds, the owner of the apartment building receives money from the rental income of the apartment building.
However, there are many ways to receive a tax credit and deduction for your property investment. Consider looking into them if you want to give yourself a nice tax break after the project is completed.
Use private lending markets for funding
While the US capital market is still largely unavailable to non-professional investors, it has been growing more accessible by the day. There are now multiple private lending markets for both personal and commercial loans, making it easier than ever to fund new projects.
Many of these private lending markets offer low interest rates and/or regular reinvestments in the property to help with resale value. Reselling a property is one of the biggest income streams for new project developers.
Because these new compound investors use private loans to fund their projects, they do not have to worry about either the bank or investor demanding changes to their credit or investment status before approval.