Its like anything else, you gotta start somewhere 😉 .
When I first starting investing, I didn’t have a lot of financial backing. Well, I started with nothing actually. I started wholesaling properties and I also focused on creative financing using lease options and owner financing.
What made it more difficult is when I quit my job in 2013 to go full time. It took a while to get approved with a bank, but, eventually I was able to get approved and utilize bank financing.
Eventually I was able to raise private funds from people, and I got to say, this has been a game changer. I have extended family, friends, and even past sellers who loan to me.
Whether you have plenty of funds or not, I figured Id share some of the methods I am using to acquire funding .
1) HELOC – some of the local credit union are (and have been) offering really great terms on a 2nd mortgage home equity line of credit. If you have any equity in your personal residence or your rental portfolio, it is definitely worth checking into some credit unions (or small banks) to see what they are offering. I prefer using these 2nd position HELOCS as lines, and of course, using investment property over using a personal residence.
2) 0% credit cards. I know, its different. But I was able to obtain cards with 15, 20, even 50k in 0% interest BUSINESS credit cards, some for 18 months. I used these funds for buying lower priced property, rehabs, etc. The neat thing about these is they are not on my personal credit, and, I used a business entity that was not tied to my real estate business. Google ‘top rated credit cards for businesses’ or something like this. Geekwallet or (nerd wallet?… whatever it is called) was a good resource to compare cards.
3) Small local banks – Did you know that there are local banks that will lend 100% of what you need upfront ? It took quite a bit of searching to find them, but some will loan a new purchase as a “Construction loan”, which is up to 80% of the appraised value (after repaired) . This means you don’t need a down payment and do not have to bring any money to closing. They will give you draws during your rehab period.
4) Private money. Ah, the winner. This has been a game changer for me. Imagine having the funds you need, and all you have to do is make a phone call, text, or email and you have the money in 1-3 days. No waiting on banks, no finance fees or origination fees, etc etc.. The great thing about this method is it truly is a win-win for both parties. I am able to pay a very attractive and higher interest to my lenders (because when compared to bank financing with origination costs, etc.. it is the equivalent of paying a very high interest rate to the bank for the first 1-2 years) , and my lenders get a much safer and low risk investment for their money. If I don’t pay, they get the house, and I don’t exceed a certain % of value (LTV) to always make sure they are safe.
A bonus method can be using a funding partner. You give up more profit, but if you find yourself in a position of missing out on purchases due to lack of funding, then something beats nothing. I know several people using funding partners .
I hope some of this gives you some ideas .