I am very new to REI, my experience is the following (its all personal...so I am trying to see if that can be leveraged):
- purchased my first home in 2001 for $125,000 did a rehab (about 15K) and sold it 3 years later for $152,000
- I put the money toward a down payment on a new construction (my first mistake) in 2005, the height of the housing bubble. Took a bath on it in a short sale in 2010 during a divorce. I also had to declare personal bankruptcy in 2011 because of the divorce and the balance of that short sale.
- Fast forward 4 years, I am remarried, my wife and I had a house that was owned by her mother, she let us use the equity in the house to rehab it and put it in our name.
- Unfortunately she passed away the same year. My wife and I let her house sit for a year then did a quick paint and carpet rehab and sold it quickly last year. Most of the money went to pay the remaining debt in the estate.
So that is my personal history. Where I stand right now is that I want to get into REI but have little cash at the moment, and I am unsure where to look to raise it. I have about $60K in an IRA that I can tap (with tax and penalties of course), but that to me seems to be a last resort. I am not enamored with the stock market and feel I can get a better return on that money than my IRA does. I have a 738 credit score now and make 6 figures, but the bankruptcy seems to overshadow that. I am 5 years into the aftermath of the bankruptcy.
My goals are:
- Flip my first house in Q1 2017
- Flip 3-4 more houses in 2017
- Quit my job and continue to flip, buy & hold full time in 2018
I need advice on where to go next. What funding avenues can I tap? I am motivated and I don't give up, I just need some direction on where to go next. I am going to start looking at properties to find a deal, but I feel like I need to have the financing lined up to pounce on a deal. Any pointers?
@Christopher Blanco , There are many discussions on "Hard Money" loans. Some will lend a very high percentage of "ARV" After Repaired Value of the property. They also charge points though. This may be a good place to start. My advice would be to truly read up on these forums and gain the knowledge and the understanding of what you want to accomplish, just like you are doing. I would also locate a Hard Money Lender and give him a call and ask as many questions as you can.
As far as your "IRA" goes, you can also look into rolling it over to a "Self Directed IRA" and avoid tax and penalties for things like real estate investment. Though, I am not an expert on IRA's, this concept should be discussed with a financial advior. But, it is possible.
Get involved in a real estate investment group in your area, many people say this, but few actually do it. The most dramatic way it could help, is you may get a chance to shadow someone who has been doing it for a long time.
What are some reputable Hard Money Lenders to talk to? I am unsure about who is good and who is a scam! Does anyone have a reputable HML that works with brand new investors?
In the Marketplace tab at the top of your screen, it has a drop down box to "Hard Money Lenders". You can then click on your state and you will see BiggerPockets approved Hard Money Lenders. Check out the forums on Hard Money Lenders and you should find a BiggerPockets subscriber that is a HML and you can PM them. One of them should be eager to answer any questions you have. Those type of Lenders do not necessarily care how many deals you have or haven't done, they care about whether they are easily going to get their money out of the deal. You will have to present a deal breakdown to them, and they usually fund within a week or two.
If you decide to buy and hold vs rent with your IRA money, or you roll your IRA over to a Self Directed IRA, I know of a turn key rental provider who allows non recourse lending as a part of their turn key services/package. Might be worth looking into, you could buy 1-2 rentals with $50k - $60k with their program and make double digit returns in your IRA while building equity.
Thanks so much! There are so many things to look at!
If you decide to roll your IRA into a self directed IRA, I recommend talking to John Park at PGI Self Directed. John is highly knowledgable this topic, and he setup a checkbook controlled Roth IRA for me for a very reasonable price compared to his competition. As long as I don't make a prohibited transaction, I now have direct control over my Roth IRA funds, and I avoid a lot of the annual fees and transaction fees that custodians charge for SDIRA's. I'm still learning as well, but if you decide to go the SDIRA route, get multiple quotes because the front loaded setup costs can be expensive. Also know that you can't leverage as much with IRA funds versus if you are using personal funds. Most banks will require 40% down with IRA money, but again, speak with an expert.
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