Buy and Hold - Hard Money / Creative Financing

[Brett C.]

Hey everyone and merry Christmas!!

I've searched for answers to these questions in the forums but I couldn't find posts where my questions were answered, so I apologize in advance to all of the usual suspects who so kindly oblige stooges like me who don't understand yet the ins and outs of hard money and creative financing.

In general, I've been researching HM and creative financing strategy for buy and hold investing which is how I invest.

Questions:

1. Can I tap the equity in another investment property to facilitate the purchase of additional properties?

2. What creative methods are there, and are there books you could recommend which focus on how creative financing and HM strategies for buy and hold investors?

3. one article I read suggested getting a HML on your current investment and buying another. Do HMLs do this? What LTV would they require? I recently bought a property with 20% down and even with a HML in second position it would still produce a strong CF depending on the terms. This is the article, it had tons of ideas but some of the strategies weren't explained very well IMO. http://www.robertgallen.com/nothingdownrealestate.php

What resources / books can this team suggest for this subject? Financing flips is pretty cut and dry and easy to understand in terms of HM as a tool to fuel growth, but I feel like I am poorly educated with regard to creative financing methods for buy and hold business models.

Again, merry Christmas and good luck in your 2014 business ventures!!

[Jon Holdman]

If you actually have equity in a property, you can refinance and get it out. I've seen a few posts lately saying a few lenders are doing LOCs on investment property, but that's still rare. By the way, requests for specific lenders have to be posted in the Marketplace.

But the LTVs are going to be like 75%. And there are costs for the loan. So you have to have significant equity. A property you recently bought with 20% down has very little equity. None of which you can extract. If you've done major improvements, wait a year and perhaps a new appraisal will show enough equity to justify the costs of a refi.

Few, if any, HMLs are going to accept a loan in second position. And their rates are going to be very high.

One strategy is to buy and rehab with an HML and then refinance after owning it for a year.

Be sure you're not falling into the "cash flow = rent - PITI" myth.