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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  • Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    The best lender is always going to the seller themselves . Learn how to deal directly with the bank president ( the home owner) and you’ll be able to buy as many houses as you can handle ! Hashing out a killer deal in your favor is Not easy but possible

  • Rental Property Investor · Melbourne, FL · Member since 2017 · 114 posts · 108 votes
    7y
    Originally posted by @Mark Durham:

    Credit cards are a good source of funds and it's unsecured.

    I would caution the use of credit cards. They are probably not best and should be the last choice for most people. My thoughts are that if someone needs to use a credit card to fund their first property, perhaps they are not ready.

  • bethel, CT · Member since 2015 · 335 posts · 57 votes
    7y

    @William Lees

    I opened up 3 unsecured lines of credit over 100k. I applied to all the banks in one day, has worked well for me so far.

  • Member since 2019 · 2 posts · 1 vote
    7y

    @William Lees

    I’m new to real estate investing, but I wanted to say thanks for providing this info.

    Sieglinda

  • Real Estate Agent · Raleigh, NC · Member since 2019 · 6 posts · 5 votes
    7y

    @Will Barnard Great stuff! I am still new to this. would you give a little more detail on Hard money lenders, what to expect(interest rate, fees,etc)? and for private money lender, what kind of paper works needed to get the funding? Lets say I know a friend who can lend me 100K, we have settled on the term and now I am putting an cash offer for the deal, how does it go from here? Thank you in advance.

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

    @Lewis Schwartz I have also utilized F&G. Great concept, but lousy execution. I'm happy to let fellow investors know and share my experience with them so they can decide whether or not to pursue funding through F&G, but I wouldn't say I promote them. 

  • Rental Property Investor · USA · Member since 2019 · 8 posts · 6 votes
    7y
  • Rental Property Investor · USA · Member since 2019 · 8 posts · 6 votes
    7y

    @Bob Daniels  My cc's are in my business name, so they don't report to the credit bureau, right now my score is just under 800, and my wife's is over 800. Seems like it doesn't matter that we have a good score. So frustrating.

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

    @Leon Yin

    Hard money is essentially a company that is lending private money. They find people with money and put them in a pool for them to lend to investors. They have high rates because of the risk involved with their loans, rehabs and distressed properties. The rates I have seen have been usually between 10%-14% with 1-3 points and anywhere from 0%-20% down. They will usually lend from 70%-90% or the ARV but sometimes will do 100% depending on the program they are offering. Experience is a key in helping you get a better rates. Hard money can be good to use because it is easier to find and get most of the time. The question is can you afford it.

    For private money the key is to get a lawyer experienced in writing notes for investment properties. He can draw up the mortgage for you. you also want to usually do a JV agreement as well IF the person is getting anything beyond just a regular lender, EX spilt of profit. Also make sure it is extremely clear what everyone is doing and responsible for and what is expected, this helps with miscommunication problems if something went wrong, EX longer hold time etc.

  • Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
    7y

    @Clifford Paul do you get reoccurring offers of 0% APR for 12-18 months on the same card periodically or is it usually a one time offer with a new card?

  • Rental Property Investor · East Longmeadow, MA · Member since 2019 · 154 posts · 64 votes
    7y

    @William Lees

    Please note if you default in the 401k loan the tax benefit is lost and will have to pay taxes on the 401k balance.

  • Rental Property Investor · East Longmeadow, MA · Member since 2019 · 154 posts · 64 votes
    7y

    @William Lees

    Helocs are a good source of funds as well.

  • Rental Property Investor · Charlotte, NC · Member since 2017 · 298 posts · 232 votes
    7y

    I refinanced a car to buy my first house. It was secured debt so the bank didn't care as it didn't move my DTI enough to negatively impact the deal. I would caution this approach as I ended up needing to replace the car before it was paid back off and it took me a few years to recover from that.

  • Investor · Ogden, UT · Member since 2018 · 295 posts · 208 votes
    7y

    @Bob Daniels I have yet to hear about the discover card with 5.9% fixed interest. Thank you for pointing that out. Have you used these to do rehabs?

  • Specialist · Huntsville, UT · Member since 2015 · 458 posts · 249 votes
    7y

    HELOC, Cash-Out Refi, Seller Financing and so many other creative ways. Private money partners as you mentioned is our favorite way.

  • Glen Cove, NY · Member since 2019 · 41 posts · 14 votes
    7y

    @Manuel Torreira

    I’ve been sitting here scratching my head on how to finance and totally forgot about my 401k! thanks!

  • Member since 2019 · 1 post · 0 votes
    7y

    @Ankush Ratwani How do you "throw your property to HUD?"

  • Rental Property Investor · Palm Desert ca · Member since 2016 · 101 posts · 72 votes
    7y

    @Prashant Sheth I did exactly that for a deal! I get those checks in the mail non stop and they are great! 0% interest for 12 months with a small one time fee and you can use the checks like cash ! Good to have those around for lot's reasons. 

  • Phoenix, AZ · Member since 2017 · 135 posts · 294 votes
    7y
    Originally posted by @Blake Dailey:

    @Bob Daniels I have yet to hear about the discover card with 5.9% fixed interest. Thank you for pointing that out. Have you used these to do rehabs?

    Generally I don't use this as my primary source of funding, I typically have enough cash on hand and use these when my projects go over budget or if an HVAC unexpectedly needs to be replaced etc.  Having access to super cheap money that won't get shut off during a recession allows me to carry slightly less cash reserves.

     For Discover, it's part of their SCRA benefits so you need to go to their website and sign up for it (Servicemembers Civil Relief Act, the same law that lets you terminate leases early when you PCS etc).  You need to provide simple information such as the date you joined the military and expected departure date so that they can verify that you are in fact in the military.  It usually takes about a week for them to run their checks, and after that you should get the 5.9% rate. 

    Every CC offers SCRA benefits, however by law, SCRA only applies to pre-existing debt you had prior to joining the military.  The good news is that some CC companies go above and beyond what is required by law.  Discover extends their low interest rates to all military members, regardless if the debt (or the account itself) was pre existing or not.

    Other notable CC items for military members are that both Chase and AMEX eliminate all of their random fees, including on accounts that were opened after joining the military.  This is beneficial for several reasons, but I use it mostly for cards that otherwise have a high annual fee.  For example, every single military member should own a Chase Sapphire Reserve.  The card typically has a $450 annual fee (free for military) and in return, you get $300 worth of travel reimbursement every year.  This could mean uber rides, hotel stays, airline flights etc, as long as the spending is classified as 'travel' by the merchant swiping the card, then it is eligible to be reimbursed.  Even if you plan on living frugally and not doing any traveling for this particular year, you can go online and buy $300 worth of airline giftcards and use them whenever you want.  There are numerous other cards out there that offer good benefits like this, but this one is probably the best due to its simplicity.

  • Member since 2019 · 8 posts · 1 vote
    7y

    @Manuel Torreira

    Who do you speak to when time comes to borrow? Your bank or 401k advisor?

  • Rental Property Investor · Harrisburg PA · Member since 2019 · 62 posts · 42 votes
    7y

    Whole life cash value is cheap as a mortgage at my 5% self loan rate

  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    7y
    Originally posted by @Account Closed:

    @Steve Mahnke

    There’s a couple different things you can do with credit cards, you can use them for closing costs and down payment’s, You could also use them for fees. And if you have enough You could potentially even buy the house itself. The key component is knowing how to get the cash off the credit card. Sometimes they give you checks that you can use, you could also do other payment ideas to get access to the cash, like cash advance and even using pay pal.

    There are a few different services out there that will help you get the credit cards and tell you how to use them. You can find the companies online or even through networking events and other investors.

    Kindly recommend your top 3 reputable providers. I need this service to complete my first deal.

    Thank you

  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    7y
    Originally posted by @Nicole Heasley Beitenman:

    @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. 

     Very well stated but not that easy. Thank you for the quick illustration

  • Rental Property Investor · NJ · Member since 2019 · 442 posts · 40 votes
    7y
    Originally posted by @Nicole Heasley Beitenman:

    @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. 

    It just has one issue.

    that with using do much of your. Credit caRd your credit score drops, and it affects very strongly your interest rates (or getting a loan altogether )

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