Good Morning BP community, I was wondering if anybody has used any alternatives to money reserves. Can an investor use hard money lenders or private lenders to pay for a few vacant months on a MF rental property or maybe a closing cost? I dont have much in money reserves and it takes me a while to build that up. Any advice would be greatly appreciated.

Hi Kevin,

I am not sure your current situation (credit score, own a house or not, etc), but what I personally have done in the past is when I was going to school I borrowed the maximum I could in student loans at low interest rates and purchased a couple of properties. I used the excess of the loans to pay the mortgage and my job. I know what some people do is have a credit card as an emergency fund, I see citi has one out at 0% interest for 21 months! You can have more than one credit card, of course if you cant handle loans well then I wouldnt recommend this. You can also get a HELOC if you have a house to invest or a portfolio loan.

-John

Originally posted by @John Hyatt :

Hi Kevin,

I am not sure your current situation (credit score, own a house or not, etc), but what I personally have done in the past is when I was going to school I borrowed the maximum I could in student loans at low interest rates and purchased a couple of properties. I used the excess of the loans to pay the mortgage and my job. I know what some people do is have a credit card as an emergency fund, I see citi has one out at 0% interest for 21 months! You can have more than one credit card, of course if you cant handle loans well then I wouldnt recommend this. You can also get a HELOC if you have a house to invest or a portfolio loan.

-John

Thanks for the advice John! I have 750 credit score but a low 22,000 income so im going to need a co signer for a house in my criteria. My issue is on my money reserves. Id need enough for vacanies, repairs, closing costs, down payment and anything that pops up as a landlord. Im good with handling debt so that credit card from citi sounds like a plan :). Id also have to look into what HELOC is.

Originally posted by @Kevin Izquierdo :

Originally posted by @John Hyatt:

Hi Kevin,

I am not sure your current situation (credit score, own a house or not, etc), but what I personally have done in the past is when I was going to school I borrowed the maximum I could in student loans at low interest rates and purchased a couple of properties. I used the excess of the loans to pay the mortgage and my job. I know what some people do is have a credit card as an emergency fund, I see citi has one out at 0% interest for 21 months! You can have more than one credit card, of course if you cant handle loans well then I wouldnt recommend this. You can also get a HELOC if you have a house to invest or a portfolio loan.

-John

Thanks for the advice John! I have 750 credit score but a low 22,000 income so im going to need a co signer for a house in my criteria. My issue is on my money reserves. Id need enough for vacanies, repairs, closing costs, down payment and anything that pops up as a landlord. Im good with handling debt so that credit card from citi sounds like a plan :). Id also have to look into what HELOC is.

Oh I see, so are you needing this money to qualify? If so, maybe you can be added to one of your parents bank accounts. it depends on the house you are buying too. I bought my first house for $700 down with all closing costs but I worked for title company and I had real estate license so I actually made money because it was a 1% down program, escrow and title fees nearly free, and 3% commission for sale. My second house was 5% down, but again with my real estate commission at 3% it was only $2600 down with all closing costs. A HELOC would be if you own a house already and it has equity, you can get a Home Equity Line of Credit (HELOC) loan that would be tied to house.

@John Hyatt oh I know what HELOC is then. I was just unfamiliar with the acronym. Unfortunately, i do not have a home and my parents dont have bank accounts. I dont need the money to qualify, I would need the money for just in case.

non-liquid 401k/roth ira accounts can be used at 60-75% cash reserves. If you had 100k in your 401k account the bank may consider 75% of it as cash reserves to put into your lending profile.

Originally posted by @Kevin Izquierdo :

Good Morning BP community, I was wondering if anybody has used any alternatives to money reserves. Can an investor use hard money lenders or private lenders to pay for a few vacant months on a MF rental property or maybe a closing cost? I dont have much in money reserves and it takes me a while to build that up. Any advice would be greatly appreciated.

Kevin, I understand that you want to get started in rei as soon as possible, but trying to find an alternative to the cash reserves is not prudent financially. I want you to be successful and start asap but not doing it correctly might come back and bite you...

“Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty.”

Proverbs 21:5 

@Kevin Izquierdo

You can always look to IRA and 401k investors that want to invest in promissory notes secured by real estate for funding. This is a great way for them to grow their retirement accounts as the note payments would flow back to their accounts on a tax-deferred basis.