Ways I have found money for investing!

Ways I have found money for investing!

Contractor · 08234 · Member since 2016 · 253 posts · 178 votes

Hi Everyone,

One of the key parts of investing is obviously finding the financing for the deals after you find it. It can be one of the easiest parts but you need to know what to look for. So many investors will tell new investors to not worry about the money and it will come when you have a deal but they forget to tell the new investor where to get it from when the time comes. I want to compile a list of places to find the money. So below are places that I have got money from, places I know other investors have achieved financing, and I would like everyone to add the ways they have raised funds for their properties.

-Hard money brokers- this one is pretty easy to find by asking another investor or looking up online. the key is to do your due diligence and find out exactly all their costs and rules. I have been caught up on a rule before that wasn't disclosed before and it killed my deal. This money is good for getting started because it TENDS to be easier to borrow. 

-Private Money- this one is borrowing money from a private individual. It can either be someone you know like a relative or friend, It could also be someone you find that has money they are looking to lend, Doctor, lawyer, dentist, contractor, etc. It is very important to make sure everything about the deal is very clear in this type of lending so no one can say something was missed. Benefits here can be that you can negotiate a good deal on the lending, from interest to no payment and splits of profits, the creativity is only limited by you imagination. 

-401k- people can lend money out of their 401k (it is a particular one that I myself am not positive of which) this is a great way for lender to make more money in their 401k and get good tax benefits on lending the money. An accountant would be a good person to ask about more particulars on this one.

-Traditional banks- smaller banks are lending money in a few ways. They are doing a flip loan much like hard money lenders but with better rates, they are doing lines of credit to experienced investors, they are creating "Lines of credit" that are treated as mortgages but because they are "lines of credit" they are already approved and can be closed quicker. The longer you use a bank the more money they will give you. 

-Transactional funding- this is a lender that is lending you money for a wholesale or a deal where you need to buy it then you can get a bank loan on the property. they only will lend the money for 30 days at most usually and expect a fixed money back on the money usually. You can look up some of these lenders online or ask other wholesaler investors. 

-FHA 203k loan- ask mortgage brokers about these, they are very involved but can be a great start for a new investor. it takes a lot less down to get the loan and can be very helpful in protecting you on your first deal because of all the requirements needed to settle the loan. these are most common for house hacks. I know a lot of these loans require some sort of owner occupation, But I believe a few don't (mortgage brokers please clarify for us)

Crowd Funding- This is easy enough to find online, their are many websites now offering it. It is useful to use if you have little or no funds for a particular deal. I would recommend reading more online and maybe finding and investor who has done it before to find out more. 

Creative-  This is the number one thing to be when it comes to funding your deal. I know some Investors who have funded deals by doing a partnership with the current owners, ex relative dies and the family decides to finance deal for investor who gets deal done and then everyone splits profit. There are so many ways to complete a deal that it only takes a knowledge of your costs and how real estate is bought and sold to figure out new ways to get it done. 

I ask everyone to add their experiences and knowledge to this discussion so we can all have a great resource of what's possible when it comes to getting the deal together and completed.


Thanks!

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Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
7y

@Steve M. It's a numbers game. Say it's Jan. 1, and you have a $100k CC limit that's 0 interest for 18 months. You find a $20k house that needs $15k in repairs. You pull cash from the card for those transactions and have the repairs done by June 30th. You get a tenant in there and refinance it on December 31st, and it's appraised at $60k. The bank is willing to loan you 70% of the appraised value, so they give you $45k. You pay off the cards, get $10k in gold coins, and dive through them like Scrooge McDuck. 

See this reply in the discussion

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  • New to Real Estate · Allentown, PA · Member since 2019 · 62 posts · 19 votes
    7y
    Originally posted by @Ankush Ratwani:

    Don't forget personal loans like SoFi and Lending Club. I know someone who got a personal loan from SoFi and used it to help with a cash purchase. No points and 11% interest for 5 years. You can also do delayed financing with this which you can not do with a HML.

    Hi Ankush,

    I would like to connect with you on this matter.  

  • Contractor · 08234 · Member since 2016 · 253 posts · 178 votes
    7y

    @Tony Lee

    You definitely increase your debt to income but you would grow your card debt as your business grows. This way it all balances out, if the cards approve you correctly they will also only allow you to have what you can handle. Since they are a line of credit though it is only a debt when you use it, if they are untouched, which you mostly do after the time frame they have interest free, this can really help you be approved for loans and more cards because you have so much capital “available” to you. The higher the balance available the better and the strategy is to pay it off as fast as possible do it doesn’t stay on long.

    Let me know if this makes sense,

  • New to Real Estate · Allentown, PA · Member since 2019 · 62 posts · 19 votes
    7y
    Originally posted by @Account Closed:

    @Tony Lee

    You definitely increase your debt to income but you would grow your card debt as your business grows. This way it all balances out, if the cards approve you correctly they will also only allow you to have what you can handle. Since they are a line of credit though it is only a debt when you use it, if they are untouched, which you mostly do after the time frame they have interest free, this can really help you be approved for loans and more cards because you have so much capital “available” to you. The higher the balance available the better and the strategy is to pay it off as fast as possible do it doesn’t stay on long.

    Let me know if this makes sense,

    Yes it does make sense, but if we do cash advance from credit card I believe there is a 6% fee or something.

  • Member since 2019 · 9 posts · 1 vote
    7y

    @Nicole Heasley it’s kinda hard to dive through 6 coins 😜

  • Rental Property Investor · Washington, DC (washington dc) · Member since 2018 · 34 posts · 23 votes
    7y

    @William Lees

    Delayed financing is a way to cash-out refinance before the 6 month mark. It's part of the Fannie Mae guidelines that you if you do a cash purchase with no loans against the property (HML) you can immediately get back 100% of HUD or 75% LTV, whichever is lower. If you throw your rehab on the HUD, meaning you pay for it upfront, you can get your entire purchase and rehab back as long as it's less than 75% of the ARV.

  • New to Real Estate · New York, NY · Member since 2019 · 1 post · 1 vote
    7y

    @William Lees thanks for this William!

  • Member since 2019 · 38 posts · 11 votes
    7y

    @Account Closed I'm currently working for a wholesaler and i'm thinking about buying a property from him at some point. I'm a little bit cautious about trying to purchase a distressed property. I fear that banks wont loan on distressed properties and that i'll have to use a private money lender. I don't think using private money is a bad option, I'm just not sure it'd be great for my first time. Your thoughts?

  • Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    @Steve M. I know of 2 ways. I use Goldmoney (I am not affiliated with them in any way). Some use Plastiq, but I think they're a pain. 

    @Brian G. Not sure. Just pulled a number out of a hat to illustrate my example. 

    @Tony Lee My cards are business cards, so they don't show up on my credit score. Regardless, I don't think you'll find a bank that will knowingly work with you if they know you're using CC's to fund part of the deal. Your best bet, that I know of, is to fund 100% of the deal with CC's and then finance after it's purchased, rehabbed, and leased. Or you could just purchase, rehab, sell it, and then pay off the cards. 

  • Contractor · 08234 · Member since 2016 · 253 posts · 178 votes
    7y

    @Tyrell D Bradshaw

    Great place to Learn working for a wholesaler. I started off as an agent working with investors. Banks will lend on a distressed property its just a matter of finding the one that will. Start with your local banks, they either have a few branches, or the town in the bank name. Ask them if they offer loans for rehabbing houses. Some of them will. There are different version of the Loans they will offer so make sure to shop around. Ask other investors about these options they offer so you can make sure you know everything about it before you move forward. You have the benefit of setting up your team before you get started so make sure you have it lined up so you have the best chance of success the first time through, there will be hurdles but with a good team it will be less difficult to handle.

    Let me know if you have any further question,

  • Contractor · 08234 · Member since 2016 · 253 posts · 178 votes
    7y

    @Nicole Heasley

    Thanks for all of your insight into the cc’s I had no clue that people where using them with this strategy! Greatly appreciated!

  • Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    @Account Closed Anytime! Always happy to help. Have not fully executed this strategy, but I have done some extensive homework on it, so feel free to reach out anytime with questions. 

  • Rental Property Investor · Syracuse, NY · Member since 2019 · 90 posts · 34 votes
    7y

    @Nicole Heasley I cant image having a CC line of $100k! Is that a realistic number for an experienced investor? I am new and not there yet, just curious!

  • Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    @Bryan Cavellier No idea. I just pulled a random number for my example. You could combine multiple CC's, though. 

  • Miami, FL · Member since 2019 · 64 posts · 8 votes
    7y

    @Mark Durham would you mind giving a step by step example on how you can use credit cards to fund real estate deals ??

  • Flipper/Rehabber · Jackson Heights, NY · Member since 2019 · 28 posts · 16 votes
    7y

    @Nicole Heasley

    This is great! My friend has an Amazon Buisness and turned me on to Fund and Grow. I am currently his Secondary on his account and he has gotten 150K in Buisness Credit through his second round with them. I believe it is like 0% for 12-18 mos. im in the process now of getting mine donw and should know pretty shortly hopefully in the next 4-6 weeks. Hope this helps. Im not affiliated with them either.

  • Member since 2019 · 38 posts · 11 votes
    7y

    @Account Closed Thank you! And I will definitely keep in touch for any further questions. 

  • Belfast, Northern Ireland · Member since 2018 · 128 posts · 56 votes
    7y

    @William Lees

    Thanks for providing this great resource. I woukd say that my preferred method is private money in a partnerahip purely because of the freedom you have.

    What is your preferred method of financing?

  • Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes
    7y
    Originally posted by @Ankush Ratwani:

    Don't forget personal loans like SoFi and Lending Club. I know someone who got a personal loan from SoFi and used it to help with a cash purchase. No points and 11% interest for 5 years. You can also do delayed financing with this which you can not do with a HML.

    Delayed financing as in they could buy it with the unsecured LOC, and then refi out into a fannie/freddie conventional loan without a seasoning period?

  • Contractor · 08234 · Member since 2016 · 253 posts · 178 votes
    7y

    @Noah Mccurley

    Im glad that it has created such a discussion. I would say that the type of lending I use depends on the type of deal but I would mostly use private money for flips and when I get into rentals I will probably use small banks with a strategy of using their rehab loans to get in then refinancing with them. This way I can build a relationship with them to get more loans at better rates and open up solid possibilities of financing.

  • Rental Property Investor · Washington, DC (washington dc) · Member since 2018 · 34 posts · 23 votes
    7y

    @Bill Goodland

    Exactly, the SoFi loans counts as unsecured.

  • Rental Property Investor · Atlanta, GA · Member since 2019 · 82 posts · 68 votes
    7y

    @Tyrell D Bradshaw Conventional loans, except fha 203k, fannie mae homestyle and construction to perm loans, all require the property to be habitable. After quite a bit of research, I'd say for a new investor (like myself), the most accessible way to proceed is to find a 2-4 unit property that needs to be renovated, and use a fha 203k loan to finance the purchase and renovation budget with only 3.5% down. You can have the seller contribute up to 6% of the purchase price towards your closing costs. The total loan amount will be based on the ARV. You also will have to agree to live in the property for 12 months, however, you can refinance into a conventional loan after the reno is completed (wait 6 months to prevent your lender from being charged a huge penalty). Of course, you will need to force the equity into the property through the rehab in order to refinance right away.

    Since you work with a wholesaler, you should know that you'd have to purchase the assignment from him/her with cash or hard money. Assignment fees are not allowed on the HUD when the buyer is using conventional financing (due to RESPA laws designed to protect consumers). A double closing may work if the county and your fha lender allow same day title recording of the deed transfer from the first closing. Not sure about that part.

    However, you could use wholesaling marketing tactics to find a great deal on property that works for all of this. The key is having equity in the deal so you can refinance out of the fha product to remove the MIP and possibly pull some cash out. I'd focus on a four unit so you can get the most cash flow to cover your mortgage.

  • Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes
    7y
    Originally posted by @Ankush Ratwani:

    @Bill Goodland

    Exactly, the SoFi loans counts as unsecured.

    Awesome, thanks for clarifying. I know they count as unsecured, just didn't know if unsecured LOC was allowed because it's technically still a loan. Any idea if I would be able to use a combo of my own cash, plus the personal LOC to purchase a property cash, do a light rehab and quickly refi out into a conventional loan?(assuming I have the equity)

  • Rental Property Investor · Washington, DC (washington dc) · Member since 2018 · 34 posts · 23 votes
    7y

    @Bill Goodland

    Exactly what I'm doing right now. A good lender/mortgage broker will remove the loan from your DTI since you will be paying back your loan with the refi.

  • Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes
    7y
    Originally posted by @Ankush Ratwani:

    @Bill Goodland

    Exactly what I'm doing right now. A good lender/mortgage broker will remove the loan from your DTI since you will be paying back your loan with the refi.

    How much are you able to get with the personal loan? It looks like up to $100,000 on their website but don't know if I'd get approved for anything close.

  • Rental Property Investor · Washington, DC (washington dc) · Member since 2018 · 34 posts · 23 votes
    7y

    @Bill Goodland

    I got 40k, with decent to good credit so I’m sure you can get that or more. I didn’t ask for more but I don’t see the downside of trying. It comes down to the monthly payment with higher loan amounts which can be a lot. My lesson learned was taking one out and not having a property secured. Still in the process of putting in offers while my monthly payment is going.

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