Tips for Funding the Overlooked Costs of Purchasing an Apartment Building
If you are considering investing in an apartment building, there are certain costs that will undoubtedly be a part of your transaction. These often-overlooked costs include your security deposit and due diligence costs. You may not initially have the money to cover these costs but that does not mean that you should give up on your venture. These tips will help you acquire the necessary funds to ensure you can pay these costs.
A good way to acquire the funds necessary to pay your security deposit and due diligence costs is to get the money from an investor. The fact that they are already investing in your investment means that they already trust you. If they are concerned about not getting their money back, you can assure them that, so long as the contract is worded correctly, you should not lose the security deposit. If you decide to terminate the contract before the due diligence period expires, include a financing contingency and the property does not appraise, or if you go to closing, you will get the security deposit back. You can make additional assurances to the investor through a promissory note with a personal guarantee and can pay them a return through interest, a fee at closing, or extra equity in the deal.
In addition to finding funds to pay the security deposit, you will also need to find the money to fund your due diligence. There are certain aspects of due diligence that will cost you money but are also integral parts of ensuring you are purchasing the right property. These include a property inspection, the cost of appraisal, and a legal retainer to draft documents. If you don’t have the money for these tasks, you can go to an investor to help you. Unfortunately, unlike with your security deposit, you won’t get this money back. But using the same assurances you can get help from your investors.
An apartment building can be a solid investment but an expensive one. If you can’t afford this venture, you may be able to get the help of your investors. Doing this can make it an advantageous investment for both you and the investor. If you are looking to invest in apartment buildings or other commercial real estate, come to Harkins Commercial Real Estate for help.
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