How did you get creative to raise capital?

Question

I want to hear from others how they got started raising capital or where to learn more about it. I want to JV partner with someone who has construction management experience to flip houses in Tucson, AZ. "When you don't have money find a partner with money or find a really good deal and the money will come," I have heard from books and podcasts. So we need a third partner with money as I continue to hone my skills at finding and analyzing deals for profitability and we'll have our business core team.

I have some of the money to put as a down payment but its equity in my 2 rentals that I have. On my primary home, I'm in the process of getting liquid funds in the form of a HELOC. A refi on either of my rentals will give me a worse rate and higher monthly payments which I may have to resort to, but will take even more time after the HELOC is funded. Right now, most of the funding will have to come from a hard money loan.

When we find something even close to a deal the clock is ticking to get it under contract (MLS listings) but its not a smoking deal because of all the hard money loan costs and the lack of liquid funds to pay them. I know I need to keep deals coming in so I'm going to have to invest in a marketing strategy to get off-market leads. What strategies did you use when you found a deal worth pursuing? Did you attempt a deal you regretted because of low profitability in the end? How did you network with others looking to invest with you?

Patricia Steiner · Answer

This won't be popular: you're not ready. You want to joint venture with someone with money and construction management experience...would that person need or want to partner with you? What would you bring to the table to make it worth it? Who is that person? And, books and podcasts are not skill based...they provide knowledge. Skill comes from knowledge plus experience. I have seen so many folks jump in with a toolbox full of podcasts who have drowned quickly. It's called "drinking the Kool-Aid."

Get a business plan together. Identify a partner. Look at opportunities - is flipping really worth it in Tucson right now? Do you realize that properties that sell twice within the same year undergo a more stringent appraisal review that could make it difficult on a buyer to get financing? Analyze a few properties to determine total investment and then prepare a presentation to a potential partner on several opportunities.

You're not ready - yet. I hope you'll take the time to convert dreams into tangibles so you can leave skid marks on that road to success.

Andrew Kiel · Answer

@Patricia Steiner - I also strongly agree with your assessment. In my opinion, flipping is one of the highest risk activities you can do in real estate and the odds of finding a viable flip off the MLS in this market is highly unlikely.

That being said, I still want to encourage you to look for off market deals - they're definitely still out there. Finding a good opportunity is still possible and the right deal will greatly increase your odds of getting a good partnership or JV.

Ronald Allen Barney · Answer

Some things that investors I've worked with have done:

1. FHA for primary residence at 3.5% down, with a time period before renting it out.

2. Finding off-market deals at lower cost (and lower than what wholesalers bring).

3. Leverage existing equity in the ways you mention.

4. As a last resort if the capital isn't there and a buy and hold won't make sense with hard money in the picture, pass the lead on to other investors for a finder's fee.

How did you get creative to raise capital?

How did you get creative to raise capital?

Most Popular Reply

3 Replies