Creative ways to raise $40k?

Question

Tapped into my primary home equity and have a $100k HELOC. Want to secure another $40k for DP without using my reserves. Single family property with ADU. Main house and ADU has long term renters wanting to stay. $700k PP. Cash flow would be approximately $700/mo.

Dan H. · Answer

>with a family (wife + 7 kids) I don’t have time to spare with all my responsibilities. This concerns me more than that you are capital limited.  Owning Buy and Hold residential rentals are not passive even with the use of a property manager (PM).  PMs need to be managed.  Managing properties without use of a professional PM requires setting up processes, dealing with tenants and contractors, staying current on the various rules and regulations.

Given the "don't have time to spare" I highly recommend the use of a professional PM.  Staying aware of the various always changing rules takes time and is important.  Failing to keep current on the various rules can cost you a lot of money.  I see posts regularly on BP that to paraphrase, " I Fu[ked Up and how do I fix this mess I created it".

I suggest you look for a more passive investment.  If you want to be in RE maybe a syndication, REIT, NNN, etc.

Good luck

Peter Mckernan · Answer

@Justus Angan do you have a 401K, you can tap into it as a loan up to 50% or $50,000 on it. The next option is a personal line of credit from the bank (as long as you qualify for DTI with it you are good). A couple options here and the next one would be taking that $100,000 going to do a flip, do the flip property (have margins for $40,000). Just a few quick thoughts.

Justus Angan · Answer

I do not have a 401k that I can tap into. I have thought of getting a personal line and should qualify for that. My own primary house is about 20% of my take home, so I have room.

Also was thinking of asking the seller to finance the difference I need for the DP but also throw in a percentage of the cash flow for 2 years with a 2 year timetable to pay back the seller financed loan as well. Loan + interest + percentage.Thank you for your response!

Christine Bellish · Answer

Hey Justus - I apologize if my comment seemed like a dig at you - it wasn’t meant to be in any way! Sometimes the tone doesn’t come across the right way, so I am truly sorry if you took it negatively.

I absolutely agree with everything you said! Yes, of course you do have to start somewhere. No one wakes up with experience, you have to take action and go out and do something to gain experience, and I applaud you for doing that, and for using this platform as a tool to learn.

I am not discouraging you from being an active real estate investor. I was just echoing the sentiment someone else expressed on this post in response to your statement about not having the time to spare. Was suggesting that a more truly passive form of real estate investing like syndication might be a better option for you to consider, and I say that from my own experience - because I got involved in a project that almost broke me, a BRRRR that ended up working out, but was a nightmare for 9 months. After that experience I am personally more interested in more passive investments like syndication, so that’s where I’m coming from.  Again, my apologies, I was just providing a different option for you to consider, not trying to discourage you from getting involved in something you are passionate about. I wish you the best of luck in whatever next step you take!

Justus Angan · Answer

The great thing is the property already has two long term renters. I confirmed with my lender that he can use 75% of the rents as income for qualification/approval. The renters pretty much qualify me for the loan without having to really go into my income.

Jay Hinrichs · Answer

I thought it would be fun to use my Tesla to be a uber driver  got all set up for premium fee's  give me something to do.. but then they said I have to allow dogs. Ended that one before I started..

Nathan Gesner · Answer

When you say $700 cash flow, do you mean $700 after paying mortgage, taxes, and insurance? Or are you including some set-aside for maintenance, vacancy, capex, PM, etc?

You can ask friends or relatives. You'll be surprised how many people you know that have money socked away, particularly after all the "free" cash our government has given out the past two years. The danger is that you typically don't know how they are as a business partner. If things go south, you could lose money and the relationship. Can you pick up an extra shift? Sell something? Deliver for Door Dash? Network with other investors at a meetup and partner with someone?

Brock Mogensen · Answer

Private money will be the cheapest way.  Hard money will be easier but much more expensive.  If you have someone in your network that will lend you the $40K at a set interest rate, that is the ideal way to do it.

Don Gouge · Answer

I am not a very sophisticated investor so please excuse this country math and my lack of worldliness.  So this property would cash flow 700 per month after borrowing an additional 140k for a downpayment. Is interest on this 140k used in computing this 700 cash flow? As I read a little further along, the nuggets of truth involving the 700 cash flow started to come out. There will be NO 700 cash flow! You have no allowance for vacancy, capex or management. I dont know all of your numbers, but I can see this 700 shrinking to zero. Calculate your full interest cost on the full purchase price along with closing costs and capex, management, vacancy, mortgage, taxes, insurance. Now ask if it was worth maxing out your equity line to break even.

Eric Bilderback · Answer

Yup you can also look at credit cards that run at 0% for a year and try and pay it all back and refi the balance if need be.

Creative ways to raise $40k?

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