Funding for my first investment property while being a entrepreneur
Property Manager · Milwaukee, WI · Member since 2022 · 1 post · 0 votes
Funding for my first investment property while being a entrepreneur
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3yQuote from @Jae Jarmon:
I found a multi family four unit asking price is $224,900 and I had my realtor ask them if they would take $160,000 they said yes. Awesome right... One of the units is completely gutted they started a remodel and decided not to finish it. They have most of the materials in the unit already so I won't have to buy much. But this is actually the good part the issue is funding. I have tried to get funding and it is not as easy as all these podcast and youtube videos say it is especially for an entrepreneur. Why are there so many fake private money lending companies out here it's ridiculous honestly. When you are new people just want to take advantage of you and I do not like it. Any who my question is do anyone know any private lenders or hard money lenders or angel investors that would like to help a newbie get started? Thanks for listening
Money is VERY DIFFICULT to come by these days. You are correct everyone makes it sound as easy as going to the store and buying a loaf of bread. If you do not have 30% down in today environment it will not be easy. Of course you will also find the "get the seller to finance the property" but again that is less than 1% of all sales so that is difficult as well.
The money you do find (especially if you are new) you are going to pay an arm and a leg for. We recently lent at 13.5% and 3 points - to give an idea.
A good start to find lenders is Scotsman Guide or AAPL.
7e investments53 Reviews
12 Replies
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
Quote from @Jae Jarmon:
I found a multi family four unit asking price is $224,900 and I had my realtor ask them if they would take $160,000 they said yes. Awesome right... One of the units is completely gutted they started a remodel and decided not to finish it. They have most of the materials in the unit already so I won't have to buy much. But this is actually the good part the issue is funding. I have tried to get funding and it is not as easy as all these podcast and youtube videos say it is especially for an entrepreneur. Why are there so many fake private money lending companies out here it's ridiculous honestly. When you are new people just want to take advantage of you and I do not like it. Any who my question is do anyone know any private lenders or hard money lenders or angel investors that would like to help a newbie get started? Thanks for listening
Money is VERY DIFFICULT to come by these days. You are correct everyone makes it sound as easy as going to the store and buying a loaf of bread. If you do not have 30% down in today environment it will not be easy. Of course you will also find the "get the seller to finance the property" but again that is less than 1% of all sales so that is difficult as well.
The money you do find (especially if you are new) you are going to pay an arm and a leg for. We recently lent at 13.5% and 3 points - to give an idea.
A good start to find lenders is Scotsman Guide or AAPL.
7e investments53 Reviews - Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
Use hard/private money that others you know have used. If you don't know anyone who has used hard money you need to network more.
Are you planning on living in 1 of the units? If so, call a mortgage loan officer and see if you are eligible for an FHA 203k loan.
This loan product will allow for you to put little money down, and it will give you funds to fix up that unit that is gutted.
- Realtor · Killingly, CT · Member since 2016 · 21 posts · 9 votes3y
Sounds like you may be having issues getting a loan as an entrepreneur because you don't have 2 years experience/income? In that case, if the seller is motivated enough, which it sounds like they are, you could go back to them and propose that they hold the note for a year or two (maybe with interest only payments), giving you time to rehab and rent, and after that time you should have the equity and tax returns to be able to refinance into a conventional loan. A motivated seller will often be happy to earn (almost) risk-free interest on their money. I've used this method in the past and it worked great.
- 3yStephanie P.Pro MemberWashington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
Quote from @Jae Jarmon:
I found a multi family four unit asking price is $224,900 and I had my realtor ask them if they would take $160,000 they said yes. Awesome right... One of the units is completely gutted they started a remodel and decided not to finish it. They have most of the materials in the unit already so I won't have to buy much. But this is actually the good part the issue is funding. I have tried to get funding and it is not as easy as all these podcast and youtube videos say it is especially for an entrepreneur. Why are there so many fake private money lending companies out here it's ridiculous honestly. When you are new people just want to take advantage of you and I do not like it. Any who my question is do anyone know any private lenders or hard money lenders or angel investors that would like to help a newbie get started? Thanks for listening
203K. Find a 203K lender in your area. You will have to live in one of the units and the other units will have to satisfy the self sufficiency test, but it's the cheapest and easiest way for you to purchase this property if you qualify.
I really don't think that the companies are fake, but they just don't do what you want them to do. Maybe they're hard money companies and you're going to try to live in the property. They can't do that. Maybe you don't have the down payment or reserves or experience for this type of a transaction. I don't know, but for a purchase like this, you need the right loan product and occupancy situation. Hard money would be the way to go if you have the cash and are not going to live in the property. Not what I would recommend if you're new.
- 3yMarty JohnstonPro MemberLender · Wauwatosa, WI · Member since 2016 · 571 posts · 204 votes
Quote from @Jae Jarmon:
I found a multi family four unit asking price is $224,900 and I had my realtor ask them if they would take $160,000 they said yes. Awesome right... One of the units is completely gutted they started a remodel and decided not to finish it. They have most of the materials in the unit already so I won't have to buy much. But this is actually the good part the issue is funding. I have tried to get funding and it is not as easy as all these podcast and youtube videos say it is especially for an entrepreneur. Why are there so many fake private money lending companies out here it's ridiculous honestly. When you are new people just want to take advantage of you and I do not like it. Any who my question is do anyone know any private lenders or hard money lenders or angel investors that would like to help a newbie get started? Thanks for listening
Jae, I'm local to you here in Milwaukee (Wauwatosa) and would love to connect! There are options here available to you. Sending you a DM
- 3yRebecca KnoxBusiness MemberSpecialist · Milwaukee, WI · Member since 2014 · 1k+ posts · 1k+ votes
If you're in Milwaukee, we have great hard money lenders. The Hard Money Co, Mach1 Lending, MGM Private Capital & Wisconsin Hard Money--and they all have a reputation of not playing games and won't leave you high & dry the day of or a couple days before closing like some others have.
- Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes3y
Debt markets are not easy right now. If you don't have relationships with banks and/or a strong balance sheet right now, it is even harder. That being said, banks are still lending. I suggest working towards creating a strong banking relationship with a local small bank. They generally will be more open to making exceptions.
- Interior Decorator · Ulster County, NY · Member since 2020 · 204 posts · 177 votes3y
Have you looked into a DSCR loan? It is based on the asset, not your income. You will have to bring a down payment... but maybe it's something worth looking into?
No matter what, don't give up. This is what separates those who are successful. Keep going, you will figure it out. :)
Good luck!
- Specialist · NJ · Member since 2022 · 1k+ posts · 653 votes3y
Unfortunately, you have a few extenuating circumstances. First, your new and second it's a 4 unit that looks to be abandoned mid project. So, the barrier to entry into the fix and flip/hold world is being able to get through that first deal or two. Terms suck. Leverage sucks. Rates suck. It's like hazing. No different than giving a pledge a hard time before they become a member. The way to combat this is to put a partner on the deal that brings the experience and some cash.
Private Money is such a misnomer. People think that Private Money outfits just throw their money around, and they do not. Some won't even allow any creative financing at all. The private money most people think about is the "personal" private money. The rich mommy or daddy or sibling that does not care that your ARV is off 20% at least and they will not care if the interest rate is 10% instead of 11.5%. They may even let you roll all the payments to the back to be settled at the time of sale or refi. That's true private money. Where you and your private lender sit down and work out terms without being held to strict guidelines and a minimum threshold of ROI.
Private Money outfits - that's either brokers or maybe a private fund of investors looking to lend. The brokers are of course imprisoned to the guidelines of their lenders, and the capital fund will have strict guidelines no different than the HMLs out there, why? Because they are not in the business of losing money and having loans default or getting stuck with risky loans on the books because no capital partners in the open market will take it.
All these lenders out here sell their loans, Civic tried to hold and it took them under, so selling these loans off to investor groups looking for the ongoing payment stream for a fund they own is vital. So all these loans, once written by the lender, they get a graded: A, B, and C paper. Of course your A paper sells best and a lender wants the reputation of writing A paper. Strong borrower, strong asset, good market. That's A paper. They'll be a line of investors to look to buy paper like that.
Now lets say new borrower, ok asset, questionable market. A lender writes that paper they pray for a B but it will be a C. Now what of they can't find a buyer? They have to hold it on the books and pray this new borrower with this ok asset in the questionable market does not default. They really do not want to put themselves there. Would you? They want tp write as much A or strong B paper they can and keep it moving.
- 3yHamp Lee IIIPro MemberReal Estate Agent · San Antonio, TX · Member since 2019 · 1k+ posts · 832 votes
Before you move forward, have you run the numbers on this property to ensure it’ll work for you?
Just because it’s a quadplex, it doesn’t mean it works for you and your goals.
Do this first.
Then, if the numbers work, go back and get the property under contract. This will be whether you assign it to someone else via wholesale or you form a JV to get this deal done.
If you’re starting out, I recommend looking for a property that will give you a quick win with experience and not a headache that may bankrupt you.
I wish you all the best!
- Rental Property Investor · Oconomowoc, WI · Member since 2016 · 996 posts · 432 votes3y
You can also try getting a DSCR loan. Its not uncommon for entrepreneurs to use this type of funding because its focused on the cash flow of the property you are buying rather than your financial income. You don't have to submit proof of income or tax returns for yourself. If you don't need an injection of cash for rehab up front this might be a good choice for you.
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