How Do You Find The Money To Make All Cash Offers?

Question

I’m a new investor and I’ve been putting 20% down for my properties so far. Which makes obtaining homes a slower process. I see people advertising they can buy a property all cash without even seeing it. How do you access that kind of money and have it sitting on the back burner for when you find a deal? Is this hard money lending or business credit?  Curious as to how it works and how to go about getting these extensive lines of credit.

Joe Villeneuve · Answer

Why would you rather pay full price for a property than only 20%

Coral Hernandez · Answer

@Chino Perez @Aaron K. @Chris B. @Joe Villeneuve @Kenneth Garrett

Hey guys. From my experience most of the time these "All Cash Offers" are from a Hard Money Lenders. Being that a Hard Money Lender is quick to close (like a real all cash deal) 7-10 Business days; It is widely considered all cash. And as mentioned above, the more you can leverage other people's money, the more deals you can be involved in.

Using a Hard Money lender, building a Relationship, and completing a handful of deals, you will be able to obtain 90% purchase price, Zero Point Upfront, and even some closing cost wrapped in the back end.

Even if your at the typical 85%LTV (15%down), is easy to get a JV or partner and split the closing cost. Now your at only 8%-10% out of pocket to close on a deal. THus allowing you to be able to acquire and brrrr, and etc.

Lets Connect and discuss further

"It takes a Village to Close a Deal"

Aaron K. · Answer

@Chino Perez some people have it as a line of credit, some use hard money lenders, but I'd say most that make cash offers just have that amount of money to offer with.  Now it is possible that they make offers with that money and then refinance later, but good old fashioned saving is the way it is done most commonly.

Kenneth Garrett · Answer

@Chino Perez

This is where private lending comes in hand.  I mostly buy BRRRR projects so when it’s all said and done I have very little money tied up.  Then you can repeat the process.  I have bought properties with 20% down and refinanced them within the year.  Buy these at a discount, sometimes with existing tenants.  I think private or hard money lenders allow you to scale.  You just need the right deal to pull it off.

Chris B. · Answer

Its the snowball effect for me.  Whenever I moved in the past, I bought a new home and rented out the old one.  It was a decade long process for me.  Now after that time, I've acquired a decent amount of equity across multiple properties and utilized cash out refinances and have the ability to purchase a property with cash should I want to.  HELOCs are a similar option for some.

Brian G. · Answer

@Chino Perez your own cash saved up over time or from a cash-out refi or Heloc. OPM: private lending, HML.

Max T. · Answer

@Chino Perez

After years of appreciation you will be able to open lines backed by your equity. As long as you don’t refi refi refi

Jesse Daconta · Answer

Syndication

Vaughn K. · Answer

Everything said in here more or less covers things. Basically you either have to have that much cash saved, or enough down as float money to do a hard/private money situation. I'm in the middle of doing my first private money deal right now actually. The guy I'm working with had some of the better terms of anybody I talked to for the type of stuff he does, but also if you can build a real relationship those guys can REALLY hook you up. Experienced flippers can get 100% funds for a lot of their deals after they've done several with the same person and they trust them.

But the situation I'm working on is kind of a perfect example of a BRRR type situation. I'm going to buy something with my cash down, there's probably $20-30K in value to create with fixing things up, you can then refi back out at the new higher appraisal after awhile, and I should end up with none of my original down payment in the property anymore, but it will still be showing the 20-30% equity. If I really pull things off well I might get MORE cash out at the refi than I put in on the initial down payment. This leaves me able to move to the next deal. That's the power of the BRRR method. If you have the funds to be doing 2 or more properties at once you can basically constantly be working on a project.

But as the guy above said, once you hit certain limits you tend to have to get commercial/portfolio/etc type loans which generally require a bit more down. There are ways to fudge the numbers a bit, like buying quad plexes as up to 4 units is considered "single family" by lenders still. This increases your maximum number of units before you run into this issue. There are a lot of weird ins and outs, many related to arbitrary lending standards or laws. It is what it is, you just have to learn them and try to work it as best you can for your situation.

Kenneth Garrett · Answer

@Joe Villeneuve

When you exceed the number of residential loans you can acquire or if your DTI is too high this is your other option.  If you believe that it is in your best interest to own properties in a LLC then you will need to go through this route.  When you are scaling your business you are going to need other financing options depending on your financial situation.

How Do You Find The Money To Make All Cash Offers?

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