Where’s the Money?

The first thing you may have learned when you became interested in real estate investing was either the concept of other people’s money (OPM) and/or leveraging. These are key concepts to learn early so you can invest and grow faster. However, not many people show you how to find money and if you find money, how to leverage it.

There are many ways to go about finding money for your real estate investments. The easiest and guaranteed way that I know how to find money to fund real estate deals is to have solid deals. While wholesalers and some investors try and do peddle properties with slim to no margins, these types of deals will not guarantee you any respectable funding. You want to find investment properties that are at least 70% of market value minus repairs. By repair, I mean that the estimated repair budget is enough to transform the investment property into the home you are using to value the property. I bet that if you have a deal that meets this criteria you can find the funds to fund it. When you begin to look for funding you want to know you have a true deal. DO NOT, I repeat, DO NOT take another person’s information as being correct. Do your own due diligence. The last thing you want to do is attempt to raise money with a property that is not a deal. 

As an investor, you want to borrow as much money as possible at the best rate possible. On the other hand, a lender wants to lend at a low loan to value, collect as many points as possible and charge the highest interest rate possible. The good news is there are many lenders competing for a profitable deal so most lenders offer similar terms.  When they see a deal with solid numbers they might make the terms a bit more favorable in order to get the deal done. If you want to make the deal sweeter, gain some rehabbing experience. Offer to help a local rehabber/investor on a few deals and use them as a learning experience. A good deal and experience will more than guarantee you can find funding. 

So where do you take your deal and experience? Excellent question. The first place I would take a solid deal is to private lenders I have been networking with and learning from long before I had a deal. You haven’t networked with any lenders?  Better get started! Let’s say you found a deal and did not make any relationships to prepare for the moment you had a deal. Where should you go for funds? The place I would and have gone to is a self-directed IRA custodian meeting. This place is full of experienced, and some new, investors that are looking to put their money to work. The last time I presented a deal there I had three investors ready and able to fund. I met all three of those investors for the first time that day. This was not a coincidence as this happens all the time.

By now you know what an attractive deal looks like, what to do before or while you are looking for a deal and where to shop for virtually an unlimited supply of funds. Now the key to keeping the money faucet flowing is to do everything possible to make sure you hold up your end of the agreement. Create win win agreements and money will eventually begin to find you.