February 22, 2018

10 Sources of Funding for Your Next (or First) Investment Property

Teo Nicolais

Teo Nicolais

10 Sources of Funding for Your Next (or First) Investment Property

We all know that Denver’s Real Estate investment market is on fire.  Access to debt and equity in commercial real estate is critical to the development, acquisition, and operations of income properties.  There are two types of financial investors in multifamily; the debt provider and the equity provider.  The debt provider lends funds to a property owner and is paid back in the form of a mortgage.  The equity provider has a vested interest in an acquisition or development deal as they put their own money into the property.  Debt financing is more common as equity is scarcer, difficult to source and requires a higher relative return than debt financing.  Owners need to choose their financing based on the specific needs of their project and the type of financing available.  The top sources of debt financing include, but are not limited to, the following:

DJ Longo

DJ Longo

Government Debt Sources

  • FHA Multifamily Insured Mortgage Program
  • Ginnie Mae Securities
  • State Housing Finance Programs
  • State and Local Bond Programs, and Low Income Housing Tax Credits (LIHTC).

Private Sources of Debt

  1. Banks
  2. Life insurance companies
  3. Pension funds
  4. Credit companies
  5. Conduits
  6. Commercial Mortgage Backed Securities (CMBS).

Balancing the decision regarding the various types and levels of financing makes mortgage credit necessary for purchasers.  An investor’s desire to purchase multifamily or investment real estate will remain just that unless capital funding is available to finance the project.  The ability to determine the capital needs for an investment and identify the most strategic and cost-efficient method for financing will often distinguish a successful endeavor from a failed one.

In the “Raising Capital For Your Real Estate Investment” course we will explore the basics behind real estate finance, sources of debt financing, the types of debt instruments and capital structures.  Don’t let this market pass you by because you don’t know where to go for funding.  Join us on October 13th and get your journey started!