Hey everyone, my name is Amadeus. I have been very passionate about real estate ever since I have stumbled upon it and spent quite awhile just building up my knowledge and a successful mindset and after I felt comfortable enough started to use the rental property calculator and found a property that I liked. The property worked so me and my wife took the leap and so we bought our first rental property just about a year ago.
But where the problem lies is that I purchased this property before I ever seen the BRRRR strategy where I would be able to go on to the next property MUCH quicker. So as of right now my property is still a liability (which I don't like) hahaha but it wouldn't be if I could rent out the basement that me and my wife are currently living in then it would be cash flow positive. But I can't buy another property yet because we do not have a bunch of money saved up because we just got married this year and we didn't use the BRRRR method so we can't refinance and pull equity out... I guess what I am trying to get at is I am wanting to know how to get into my next property the fastest, because my goals are moving a lot slower than I know they could be right now and it is sort of frustrating. So if you have any pointers or insight it would be GREATLY appreciated! :)
You could do a flip or a wholesale deal and use the profits to get your next buy and hold.
If you go the flip route, fund it with private or hard money, so you're not using any of your own capital.
I would love to but I am in NO way experienced so wouldn't nobody lend me their money just on a hope that they will get it back from someone who has never done it?
Are you investing in the US or Canada? Because it may be different where you're at. But in the U.S., Hard Money Lenders are normally lending against the asset, not you. So if you find a good enough deal, they'll lend on it and it'll act as collateral if you don't pay.
Oh really?? Awesome, I guess now knowing that it makes sense!
I for some reason just had it in my head that it's like other things like you have to pitch something just right to get them confident in you and only then maybe they will buy into it.
Thank you Dave, that honestly gives me a lot more confidence moving forward and seeking out private or hard money!
@Dave Van Horn is absolutely right. Hard Money Lenders don't really look at you, they are focused on the deal itself. They want to make their money and they want you to make money as well. Since you have little experience make sure you look for one that will be your partner and be with you throughout the process to keep you on track. They can help you with contractor issues, permits and any other unforeseen problems that you will come up against
As the others have said, it couldn't hurt at least inquiring about using a hard money lender and see what they are willing to do. Take action and you might be surprised with the result!
@Christi Hawkins is right. There are things these lenders will help you with as well.
Above all else, the best thing they do is by lending to you is that they're really telling you have a viable deal.
I should add that, a Hard Money Lender may still require a deposit so it's not exactly free money. But they will give you the bulk of the capital necessary to buy and renovate. They will want a draw schedule and they'll usually release money in phases as needed. Since you're new they may want you to have a GC in place to do the renovations.
Aside from the deposit, they also do charge fees (i.e. applications fees, interest, etc) because that's really how they make their money. But the good news is, since you're paying for it, it will probably keep you on schedule with renovations. The more experience you have working with them, the more your fees and terms are likely to change and become more favorable as well. So keep that in mind.
They usually gravitate toward lending on relatively simple stuff, nothing too crazy. So think more cookie cutter, 2 to 3 bedroom SFR homes. Especially if you're new. They're not usually lending on say large mixed use properties, for example.
But everyone's point above, it's best to start taking action as soon as possible. Take a deal you find to a lender. Even if they shoot you down, you'll learn a lot about the process and what they're looking for. You could also look at a deal that someone at your local REIA just did using hard money, to learn from their experience. Wholesalers at these meetings could also give you some clarity too since they're usually pitching deals that are contingent upon hard money financing.
Good luck, hope this info helps!
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