How to use our money

Question

Hi,

My wife and I own 2 rentals in Hawaii and we would like to scale our investment by buying rental properties in the San Antonio and Temple area in Texas. We have around 50k to start and we are not sure if we should use our money or should we use other peoples money as that is always what I hear about real estate investing. Our goal is the BRRRR strategy, we want to fix and hold and also do a some fix and flip. We are not sure about our lending options and should we do HML?

Carlos Valencia · Answer

Hello Raphael,

Its best to use Hard money for fix and flips until you can grow your bank roll. Flipping can look very appealing but in the beginning be ready to make many mistakes unless you are partnering up with an experience flipper. In most cases many beginners do so their risk is low. If you have the 50k you can maybe even use that to partner up with an experienced flipper and put some of that money in the deal as many want you to also have some skin in the game. Once you become an experience flipper you can also get better terms when it comes to hard money especially when you stick to using your regular lender. If you show consistency in bringing good deals and your a good investor they will know your a very low risk so they will cater to you with better terms. In the beginning since they don't know what your capable of it will be costly to use Hard Money. This is why its best to partner up with an experienced flipper as they will already have that track record to get better terms.

Using others peoples money works too but keep in mind you will have the investors calling you everyday asking about where there is money is at and when do they expect their return. When flipping there's many things that can come up out of your control that can prolong your progress and therefore your investors might begin to get impatient with getting their return. Pick your heat right other peoples money or Hard Money lenders there's pros and cons on using each. Which one do you think is best for you?

@Albert Bui @Matthew Kwan

Raphael Pangilinan · Answer

Hi Carlos,

Thank you for the great advise!! We are planning on moving to Texas by next year and once we are there we can join real estate groups and meet more investors and possibly a partner. We are currently looking into buying a house in San Antonio which will be our base and from there we can venture into other areas and find good deals. I am not comfortable doing Flips or Rehab while I live in Hawaii, I would rather do my first few investments in the Texas area, then when I get more experience I can go out of state.

Alan Carranza · Answer

I can recommend a few HML I've worked with in San Antonio. Send me a DM

Gregory Schwartz · Answer

@Raphael Pangilinan before looking at hard money have you thought about private loans?

Im not a flipper but I've done a few projects that required short term loans and have found that private money is: 1. cheaper, 2. more flexible, 3. excited to be part of the journey

People would rather pay a stranger who would happily foreclose on you 10-14% but hesitate to ask their own Aunt if she would want to make invest at 9%.

Good luck

John Mason · Answer

Yes also go to the local meetups and network with flippers in San Antonio and then you can have more trust

Raphael Pangilinan · Answer

Ryan,

I have talked to a few HMLs and understand it more now. We currently are looking into San Antonio first then once we move to Texas we will look more into Temple area.

Ryan Kelly · Answer

@Raphael Pangilinan you will want to interview several HMLs as they may offer different terms depending on your experience.

I’m very familiar with the Temple market and I have investments there myself. Have you visited the market yet?

Raphael Pangilinan · Answer

Thank you!! For HML is it 10% down for us on purchase price then lender does 100% rehab?

Caleb Brown · Answer

HML is a great way to go. Most people use it to start for BRRRs or flips

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