Finding All The Cash You Need To Fund Deals Without Going To The Bank – Part 1Posted on April 4, 2014 by
I believe that one of the greatest challenges to any real estate investor is raising the money or finding creative ways to fund deals. Going to the bank for money can be a long and arduous task, and while you are waiting weeks for approval, another investor with ready funds just bought your deal. Plus, the bank is going to insist that you fund the deal in your own name which can be damaging to your credit. In fact, taking properties in your own name can be outright dangerous. In addition, in our current market, it’s nearly impossible to get funding from banks to purchase great deals. And if you already have more than three loans in your name, you won’t get the money at all. So, where do you get the money or what creative ways can you use to fund your deals?
I have several great ways for you to find money to fund deals and end up with all the money you will ever need. The fastest and easiest way to locate funds is to find hard money lenders. This is the easiest type of lender to find, especially if you are just starting out in the real estate investing business. So what is a hard money lender and where do we find them?
A hard money lender is a person who will not require a credit check or long drawn out approvals like a bank would. What they will require is that you pay them an interest rate of usually 12-18%. They may also charge points on the front of the deal, usually between 3 and 5 points. These fees are sometimes negotiable and will vary depending on what part of the country you live in. They will also probably charge a pre-payment penalty if you pay the loan off early.
A hard money lender will require that the loan be no more than 65-70% of the after repair value of the property. If there is enough room in the deal, they will also let you fund the repairs from the amount you are borrowing. Their interest is guaranteed by a first mortgage against the property and the insurance you carry on the property.
I believe that using hard money lenders in your business is an easy way to get the money you need quickly, especially if you are just starting out in the business. Using a hard money lender comes in handy when you are going to buy, rehab, and retail a property. Even though using a hard money lender is expensive, if there is enough profit in the deal for you, it is well worth the investment. Remember, it’s the availability of money that is important, not the cost of money, especially when there is a big profit check in it for you. You can use hard money lenders until you build relationships with the private lenders you will use in your business.
One of the questions I most often hear is “So how do you find these hard money lenders?” There are several ways to accomplish this. One way to find them is to simply check with your local real estate club. There are usually hard money lenders there waiting to loan you money for your deals. You can also run an ad in the real estate section of your local newspaper. You can talk to people you meet at real estate events or seminars you are attending. These are all good ways to find hard money lenders to fund your deals. Your Realtor may also be able to help you find sources for hard money. In addition many times you can find hard money lenders through local mortgage brokers. Mortgage brokers usually have some hard money lenders available when they can’t get deals funded any other way so they are a good resource for you to use to locate funds you need for your deals.
For more information on finding all the funding you need for your deals read part two next month.