Invest Now Capital

How to Finance a Multi-family Real Estate Investment

Multi-family real estate investments are lucrative ventures that help you diversify your portfolio and generate passive income. However, financing them can be a complex and challenging process. Between traditional loans, private lenders, portfolio loans, and government-sponsored programs, you must figure out which financing option best fits your needs.

Let’s explain each option and why you should work with us!

Traditional Loans

While going with a traditional loan might be the first thing that comes to mind, it’s not usually the best option for your multi-family real estate investment. They require a lot of documentation and underwriting compared to your alternative loan options. They’re also much less flexible.


Qualifying for a traditional loan requires you to meet specific criteria. While these will vary from lender and lender, borrowers will usually need at least the following:


  • A credit score of 660+ (740+ is ideal for better interest rates)
  • 15% – 30% of the total loan amount for a down payment*
  • Debt service coverage ratio (DSCR) of 1.25x – 1.3x

*Typically, a minimum of 15% for two units, 20% for three- to four-unit properties, and 25% – 30% for larger properties

You can get a better deal by going off the beaten path.

Traditional Loans

Government-Backed Loans

Government-Backed Loans

Government-backed loans follow the guidelines of Fannie Mae, Freddie Mac, or the Federal Housing Administration (FHA). While these loans come with loan interest rates, they also have stricter regulations. For example, they usually require “local ownership,” which means you can only invest in a complex within your local market.

To receive one of these loans, you usually need the following:

  • A minimum credit score of 650
  • DSCR of 1.17x for FHA, 1.25x for Fannie Mae and Freddie Mac
  • Three to nine months’ worth of cash reserves

Portfolio Loans

Portfolio loans (a.k.a. bank balance sheet apartment loans) are held and serviced by the lender who issues your initial loan. In other words, you’ll be working with the same lender throughout the life of the loan.

The basic loan requirements include:

  • A minimum credit score of 600
  • DSCR of 1.25x
  • Six months’ worth of cash reserves

While they lack the strict regulations that government-backed loans must follow, they also usually come with higher rates and fees. However, they’re also easier to qualify for, and you don’t have to live in the same marketplace as you’re buying in, drastically improving your investment options.

Portfolio Loans

Private Money Lenders

Government-Backed Loans

Private money lenders lend funds to investors that they’re interested in working with in the future. They don’t share affiliations with any financial institution and usually have experience investing in real estate (but this isn’t always the case because a private lender can literally be anyone!).

Private lenders will want to know the following:

  • What’s the investment incentive?
  • Will they get their investment back, and when?
  • What are the risks?
  • How will you secure their investment?
  • How well-researched is your plan? Is it achievable?

Private lending terms vary drastically depending on who you work with. It often comes down to your experience, research, pitch, and confidence in your deal.

Multi-Family Real Estate Investments With Us

You can jump through all these hoops and stress out over DSCR, cash reserves, and interest rates — or you can work with us.

At InvestNOW Capital, we partner with investors just like you to purchase apartment buildings that meet our very, very specific buying criteria. Our experienced team enters each deal with a precise game plan, then implements that plan to bring in cash flow. We do all the work while you receive a monthly stream of passive income, appreciation, and the amazing tax benefits that come with being a multi-family investor.

We do all the heavy lifting, and as a capital partner, you just sit back and enjoy all the benefits of real estate investing while being 100% hands off.