BiggerPockets

Hello all, I am just starting out in this business and really dont have a lot of passive cash just yet. I am looking to take on investors to get my first place under my wing. The only positive side, is that I have a very very successful real estate mentor who is going to help me find the best deal to maximize profit, but its looking like I need to come up with $20K in money I dont have for rehabing. What are some of the easiest ways, that you all were able to use investors money? Also, what ROI did you offer to obtain more and more investors? Thanks

There are hundreds of different ways to raise capital for your investment endeavors. It takes work and knowledge though. Would you be interested in speaking with about this sometime?

Tyler, get a hard money loan. It is the easiest way to get the money you need.

Tyler, get a hard money loan. It is the easiest way to get the money you need.

You don't need liquid assets to get a hard money loan?

You'll need some cash for a HML. Enough to cover whatever's left after the purchase, rehab, points, and closing costs. At the least, that often means the interest payments and enough to front the rehab before you get reimbursed. You'll need an exit plan, either refi or a sale. If refi is the plan, you'll need pre-approval for the refi. You will need decent credit. The property is the collateral. The better deal you can find, the easier it is. If your buy plus rehab is 50% of ARV, you should be able to pull a flip off with almost no money of your own.

Some lenders are now requiring some investment of your own.

But, that's not really the question you originally asked. You were asking about $20K in starting cash. If you're planning on flipping $150-200K houses, and using hard money to do it, I'd say that's about right. Do it right, and you could make about $20-30K profit on that $200K house. You'd also get that $20K back. So, you could pay it back, pay some interest, pay the taxes and have money for the next one.

First time, though, things don't go well, so figure $20K at the best, maybe less.

What is it you're trying to do?

That's reasonable. The 20% is probably more than you would need, assuming they will do 100% of purchase, 100% of rehab, and some of the points and closing costs. But, they want to be sure you have some room for errors.

I would say you would be right at break even if you had a $125K note with $1700 in rent. I've been told you need a year seasoning to get a cash out refi. But go with your local advice.

The hard money will each up a chunk of change. If you buy at $80K and need another $20K for rehab, do hard money, then refi, you're looking at about $113-115 to pay off the hard money and get back what you've invested. If you refi to $125, you'll have about $10K more than you started. I'd only do that to put it right back into another deal, to pay back your starting $20K, or to build your reserves. Don't go spend that $10K. better to refi for less and have some cash flow off the property.

Try to find a REIA in Peoria, or drive into Chicago or St. Louis. I'd say Chicago since its the same state. Start meeting some people and find some local contacts.

That would be wholesaling, right? Thats a legitimate way to earn some money and to learn the real estate business. But its not the same as investing in rentals. Both are legitimate models, just not the same. Personally, I have no real desire to wholesale.

Also Jon so you can understand my throughts. I have a good paying job right now as an engineer so Im more worried about everything that I make from any refi in the next 2 years will be funneled right back into my real estate business (investment properties). I make enough to cover my current lifestyle. I am comfortable at staying right where I am now to set myself up for a successful real estate life. My whole goal for the next two years is buy a place, refi, take profits and buy another place if not two. Get about 5 or so places and enough to carry my current lifestyle and focus on real estate full time. I have big dreams, but have to have something for me to surpass.

Originally posted by Tyler Carpenter

I plan on doing this. I talked to Brookview Financial, but they need about 20% in liquidity for me to start. For the fact that I recently graduated college I have nothing to my name at my age. No house, no ira, mutal funds or anything. I have some money that I have been saving but its not enough to cover 20% of the rehab and purchase. Which is about 20k. What I meant in my original questions, Is How can I make an attractive offer to potential investors? I need to come up with about $20k in liquidity for my rehab/purchase and with being my age and nothing to show for it, I have a feeling that most investors wouldnt give me the time of day since Im just starting out. This is my problem right now.

Looks like you have a mustang to your name......I'm sure you could sell that, buy a cheap truck, use the money to rehab your first house and use some of the profits to buy another mustang.

Just an idea.