{"id":99318,"date":"2018-05-23T11:30:55","date_gmt":"2018-05-23T17:30:55","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=99318"},"modified":"2024-02-24T11:55:54","modified_gmt":"2024-02-24T18:55:54","slug":"the-hardest-part-of-the-investing-rollercoaster","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/the-hardest-part-of-the-investing-rollercoaster","title":{"rendered":"Getting Funding: The Hardest Part of the Investing Rollercoaster"},"content":{"rendered":"

As a real estate investor without a ton of liquid capital, I am always on the hunt for funding options. Those options are usually more of the creative persuasion, due to the fact that traditional financing is really<\/em>\u00a0difficult to come by. That being said, I have been asked by other real estate investors more times than I can count what funding options I have found\u2014and what has worked?<\/p>\n

Different Funding Options<\/h2>\n

After we purchased our first buy-and-hold property with a HELOC, I was immediately on the hunt for more funding for a second one. This posed to be easier in my head than it was in reality.<\/p>\n

Bank Financing<\/h3>\n

I tried multiple banks, and that ended up being a huge waste of time. The reason for this is that we purchase properties in our LLC \u2014 not in our personal names. It appears that banks simply have no tolerance to lend money into LLCs for buy-and-hold real estate. They seemed like they’d be more amenable to do so if we put the properties in our personal names. But we are simply not willing to do that \u2014 for both liability and tax reasons.<\/p>\n

I went to our banks first. But none of the banks I visited were interested in lending to real estate investors. They say the risk is too high.<\/p>\n

Then I tried another tactic. I started looking for out-of-state banks that were a bit larger, but not the big<\/em>\u00a0guys. Still, I got nowhere.<\/p>\n

Related:<\/strong>\u00a0How I Find Private Money Lenders to 100% Fund My Deals (& How You Can, Too)<\/a><\/em><\/p>\n

The last thing I tried was working with off-market sellers in other states. These sellers had their own financing through their own local banks, so we figured that it wouldn\u2019t be an issue for the bank to lend to us, since they already had the note.<\/p>\n

No dice. None of these banks were willing to lend to out-of-state investors, even if we created a new LLC in that state.<\/p>\n

I tried everything that I can think of regarding traditional financing, but we still just could not get it worked out.<\/p>\n

Hard Money<\/h3>\n

After I spent countless hours working on applications for different banks to no avail, I decided to try the hard money route. This process was much simpler \u2014 except the fact that they still needed an ungodly amount of documentation to provide the initial approval.<\/p>\n

I first got approved through Lima One Capital<\/a> (there is a local branch here in Raleigh) and then got approved through Longhorn Investments<\/a> out of Tennessee. Both companies were very similar in how they handled potential investors, and both were friendly. However, I felt that I got more personal attention from Longhorn and decided to go with them.<\/p>\n

However, while I was<\/em> able to get the initial approvals, it hit me that the interest rates and points were pretty darn high! Even so, we started looking for a second property, and we found a few that we were interested in that were within our price point. I reached out to one of the hard money lenders about these properties to see if they would qualify and to ask what could be lent on them.<\/p>\n

Ultimately, the numbers just did not work out in our favor on any of them because the interest rate was just too high. Not only that, but they are very particular about what property they lend on. They have to perform their own appraisal for market value in order for them to even consider releasing funds. The process was just too difficult, and the rates were too high for buy-and-hold. This avenue might make better sense for a fix-and-flipper, especially because the terms are also so short.<\/p>\n

The Fund&Grow Alternative<\/h2>\n

While all of this was going on, I had actually found a third\u00a0funding option. Fund&Grow<\/a> is a longer process than bank loans or hard money, so I signed up for the program in December of last year.<\/p>\n

Initially, I was told that once I signed up, it would be a pretty easy process \u2014 as they do most of the legwork. The way it was presented to me was as follows:<\/p>\n