I am new here and could really use some help. I have just qualified as realtor and am planning to start generating income with that immediately. I have some cash to start my investment portfolio - about 200K but do not have any verifiable income - the business I have been running for the past couple of years slowly dried up. I really want to get going ( and start some cash flow!) but the best I can fathom is I could try to get some hard money loans but aren't these REALLY expensive and risky? Like wouldn't my cash flow need to be pretty healthy to cover me if rents/prices start to drop - does anyone have any experience of this they could share that would be so helpful!
Theoretically if getting a hard money loan is expensive and risky you could characterize ANY loan as expensive and risky, they're just varying degrees. Is it more expensive and risky to get a 5% loan than a 4% loan? Sure, but it's just costs. Calculate them accordingly and determine where you stand and if particular terms make sense to make a deal work.
Additionally, if you can't qualify for a conventional loan (or the property can't) then you have to deal with the options that are available to you, one of which is likely hard money. It's just a matter of deciding if you want to use that option, some other option you can secure, or pass on the deal. Typically hard money is where you go when you need short term rehab money, but there are long-term products now that are more expensive than what a conventional lender will offer. But again, if you can't qualify, it's something to consider. It doesn't typically cost anything to talk to some lenders and see where you stand, just make sure if you end up getting a short-term loan to refi into long term that you're long-term lender is set up ahead of time so you don't run into any surprises.
Welcome to BiggerPockets and your real estate venture, @Helen Davis.
$200k can go a long way, depending on your market. First, you are correct, to get a loan any lender I have ever heard of will be looking at you and your credit risk before providing said loan. As a 1099 earner, most traditional banks will want 2 years of tax returns showing your income from your real estate business before they will underwrite a loan with you.
Hard money lenders are an option, are expensive, and yes, in this market, hard to make the numbers work for a buy and hold rental.
Fix and flips would be a big risk, depending on your experience, but are a way to start making money sooner. That being said, you will still be likely 4 months from money going out to money coming back in.
You could also look for a partner and or investor, that would be willing to co-sign a loan, who has income to be underwritten. If they invest cash too, it gets you more properties, so the split can be covered by larger volume.
Theoretically if getting a hard money loan is expensive and risky you could characterize ANY loan as expensive and risky, they're just varying degrees. Is it more expensive and risky to get a 5% loan than a 4% loan? Sure, but it's just costs. Calculate them accordingly and determine where you stand and if particular terms make sense to make a deal work.
Additionally, if you can't qualify for a conventional loan (or the property can't) then you have to deal with the options that are available to you, one of which is likely hard money. It's just a matter of deciding if you want to use that option, some other option you can secure, or pass on the deal. Typically hard money is where you go when you need short term rehab money, but there are long-term products now that are more expensive than what a conventional lender will offer. But again, if you can't qualify, it's something to consider. It doesn't typically cost anything to talk to some lenders and see where you stand, just make sure if you end up getting a short-term loan to refi into long term that you're long-term lender is set up ahead of time so you don't run into any surprises.
I think you're in a great position to partner with someone. There are plenty of investors with good credit and income history but not enough for a down payment. They could take out the mortgage, you could supply the down payment, and you'd go from there.
The key is finding a great deal. If you find a great deal you'll have no shortage of people that want to partner with you.