Private seller wont accept hard money -- any solutions

[Fang Li]

Hello everyone!

I'm new to real estate and currently don’t own any properties, but I’ve been learning a lot recently. I’m trying to work with a seller who deals in off-market properties, but they only accept cash or an “unrestricted line of credit” for payment.

I have about $200k in liquid funds and want to invest it all, but I'm running into challenges with payment methods. Here’s my strategy and the issue:

Current Strategy:

1. Buy a property for $200k with cash.
2. Refinance after 6 months to recover $150k, leaving $50k in the property.
3. Use the recovered $150k to invest in another property, but I need to save up more money to repeat this process.

Alternative with Hard Money:

1. Use hard money to buy properties worth up to $800k.
2. Refinance them later to recover my initial investment.

For the hard money scenario, obviously I wont be buying them all at once, but rather buy a property worth 350 -> refi -> get HML -> repeat, until my money has ran out.

However, hard money can't be used for cash offers directly, as it's typically a loan. I'm looking for ways to use my $200k efficiently and invest it somehow or even try to convince the seller..I've considered lines of credit, personal loans, and options like SoFi, but I'm not sure which will work best in this scenario. Is it possible to get a HELOC on an investment property after I Refi it, which I could then use along with my cash savings? Any advice or solutions to get around the hard money dilemma would be greatly appreciated!

[Jeff S.]

You’re unclear about what you’re looking for, @Fang Li, and where. Single or multi-families? Flips, BRRRs, or others? The financing for each can be varied. DSCR is not the all-purpose solution that the all-I-have-is-a-hammer-so-everything-looks-like-a-nail-to-me brokers want you to consider. Financing is much more nuanced and often deal-specific, though it doesn't have to be complicated or sophisticated.

More importantly, you seem to have bought into the nonsense that "off-market" somehow means "good deal." There is nothing special about buying properties not listed on the MLS so don't limit yourself. Over the last year, we've loaned on listed and not listed properties, probates, and even an REO.

Last, dump this apparent wholesaler and work with as many sellers as you can. Use as many marketing methods as possible.  Relationships are key, but with little exception, loyalty is not rewarded in this industry. Though some try to claim that a hard money loan is not really a loan, it is, but it’s a rare seller that turns down an offer for that reason alone.

Define your lane and the financing will be clearer. Meanwhile, speak to as many local lenders, of all shapes and sizes, as possible. The last thing you want is to find a great deal and then have to scramble for money.  Local lenders will understand your market, the neighborhoods, and the prevailing loan rates. Heaven forbid, they may even get to know you.