All the Ways to Fund Your Real Estate Deals

Buy Something at a Discount and Trade it for Real Estate: How about buying a cheap building lot at a discount (on eBay) and trading it at full retail for another property. You can do this with discounted mortgages as well although this is a little more of an advanced strategy.

Another way that I recently learned from a student is to list the buyer on the contract in the name of “Your name AND Financial Partner”. (EX: Larry Goins AND Financial Partner.) It’s almost like doing an assignment but your buyer or private lender is already on the contract. Your buyer or lender (Private Money) will just step into your shoes and close the deal. The only part you will need to work out is how you will get paid. If your buyer is either paying cash or is using private money or hard money then you can be listed on the HUD closing statement as an assignment fee. I haven’t personally used this method but as I mentioned I have a student that has so I wanted to pass it along in this update of the course.

Business Partnerships: One of the creative ways to fund your real estate deals until you can actually qualify for financing is through partnerships. We have enclosed in this course a sample partnership agreement. I would like to suggest a couple of things. First thing is if you are doing a partnership with someone; make sure you know who you are getting in partnership with. It’s one thing to do a partnership on one deal and another thing to create a partnership where you are going to buy multiple deals. I would like to suggest even if you know the person you are going into business with, treat each transaction as a separate partnership and only go in partnership with them per transaction because you never know what can happen. The other thing to remember is a partnership is like a marriage and you are tied to that person until you have dissolved that partnership or sold the property, so please keep that in mind. The other thing is a lot of people think that rehab loans or hard money or private loans are very expensive because some of them can be 12, 15 to 18% interest rate as all as anywhere from 4 to 10 points, however, I would like to suggest that if you get into a partnership, just remember, you are not only paying 15% interest rate, you are paying 50% of the profits as a general rule. The other thing that I want you to understand about partnerships, it’s always good to go into partnerships with someone who has a talent or skill that compliments what you do. For example, one person may be able to find the deals and put the deals together, find the buyer, find the seller of the property, find the buyer for the property, the other partner may be good at rehabbing properties, estimating rehabs and actually doing the work. So, find somebody that you are going to go into partners with that can compliment you, and not that two of you are doing the exact same thing. That tends to work out best just from my past experience.

Cash Partner: A cash partner is basically exactly what it sounds like. It is a partner that has and will be putting up their cash to fund the deal. This could be a relative, friend, co-worker at your day job, your boss at your day job or even your doctor or dentist. You can structure the transaction and profits any way you want. You could split 50/50 or you could offer your partner the first 10-20% of the profit. You could also offer your partner a minimum of 10% return on their cash PLUS a percentage of the profits at the end. Just remember that partners are the most expensive way to fund your deals.

Credit Partner A credit partner may not have any cash but they have good credit and can qualify for a loan to fund the property. These are easier to find than cash partners. If you use a credit partner just remember that you may have to put the property in the partners name in order to get the loan. So I would suggest that you know them well or have a good agreement in place prior to closing on the property.

Self Directed IRA: Yes, you can use your IRA to fund your deals but there are some restrictions on this. First, you have to have a self directed IRA from a custodian like Equity Trust. You can find them, and in fact, you can listen to a teleconference I did with Jeff Desich about them by going to www.BrainPickaPro.com I have had an account with them for years. They are great to work with and very well known in the real estate investing arena. Once you set up an account and either transfer an existing IRA to them or fund a new one then you can start using the money in the IRA to buy properties. Remember that when buying real estate with your self-directed IRA, you cannot have a mortgage on it unless it is a non recourse loan. These are very difficult to get so here is how we use our IRA to buy property. First you can use it when buying with an option. You simply write on the contract “Equity Trust FBO Your name” as the buyer or one optioning the property. In fact, the custodian will show you what to do. Then your IRA will send the funds to the seller’s attorney or whoever is holding the option money. Then when you sell the option to another investor and collect your fee it goes right back into your IRA totally tax deferred or tax free depending on whether you have a traditional IRA or a Roth IRA. This works great if you only have a small amount of money in your IRA and this is also a great way to build your IRA fast. Here is another way to buy in your IRA. If you are buying a property you can assign, and do not have to close, you buy it in the name of your IRA, and then assign the contract to another investor The money you used for a deposit comes from the IRA, and the money you make when you assign it, goes back into your IRA as well. This is a great way to take a small amount of money and build it to a large IRA account.

Unsecured Lines of Credit: Depending on the amount of your line of credit, you can use them for down payments, and even to buy complete properties. In the bookmarks, I have included a complete list of sources that cater to business offering unsecured lines of credit. Some offer business credit cards. You could apply for these in your name or find a partner to use their credit to apply. Also, when you set up your business entity whether it is a corporation or LLC, you will get mail from credit sources offering you unsecured lines of credit. Some will be the same I have provided but hopefully you will be offered other sources as well. I have included in your bookmarks a complete listing of business unsecured lines of credit sources.

Hard Money/Rehab Loans: "Hard Money" loans or "rehab loans", as they are sometimes called, refer to non-conventional real estate loans. They are usually funded by private money sources and specialty lenders. Interest rates and points on such loans are usually higher. Terms usually range from 3 to 12 months. Hard Money loans have one basic requirement. There has to be some substantial equity in the property to give the lender a reason to invest their funds in an otherwise risky venture. The property to be purchased might be presently vacant and in need of repairs. It may be older property in a failing neighborhood which has the potential for revitalization. It may be a foreclosure and can be purchased on a short sale. Or you may just need a quick closing to secure a property before you find an investor/rehabber to which you want to wholesale the property to. Or you may want to purchase a rundown piece of property, rehab the property, and refinance it for rental income. In all these cases, you would need a hard money loan because conventional financing is just not an option or it would take too long to secure. "Hard Money" is just a cost of doing business and an effective method of doing business as a real estate investor. We loan money in most areas to people who buy houses, fix them up, and sell them or refinance them to rent out. We work very hard to fund quickly so that you can demand large discounts from your sellers. We normally lend on single-family, multi-family residential houses, condos and some commercial. We do not lend on mobile homes. Our program is designed for people who can buy right, fix a property up quickly, and then get it re-sold or refinanced. There are three easy steps to our loan process: submit an application to get pre-approved, find a property and get it under contract and send us the information, prepare a cost estimate for repairs and then we process and close the loan. You can fill out an application at www.FinancialHelpServices.com. For most Lenders, closing costs are four (4) to ten (10) points plus other costs associated with any other loan closing such as attorney’s fees, processing fee, recording fees, taxes and insurance for the year, etc. These fees typically run about $2250.00 plus the points. This is however just an estimate. The costs involved may include pro-rating of taxes, insurance and interim interest. Although the term of the loan is twelve (12) months, there is usually a renewal fee of two (2) points of the loan balance that is added to the total balance if the loan is not paid off in ninety (90) days and every ninety (90) days thereafter. Most of the loans are paid off within sixty (60) days.

We can loan up to seventy (70) percent of the after repaired value. If you are buying right, you could get in for no money down, however, you cannot get cash out of a hard money rehab loan. In many instances, no money down loans are available. As long as the loan to value, including purchase price, rehab and closing cost does not exceed seventy (70) percent, you can acquire the property for no money out of your pocket. You must however have reserves to satisfy the underwriters, usually six (6) months. You cannot get cash out of a hard money rehab loan. If you would like to get pre approved so you can make all cash offers just go to www.FinancialHelpServices.com.

Traditional Financing: After rehabbing a property or just owning it for a while, most investors want to refinance out of the hard money or rehab loan. Some may just want to refinance a property to pull cash out of it. Whatever the reason, there is no minimum time that you must own the property with many of our lenders and they don't care if no work was needed. The things they do tend to care about are how long the seller owned the house and how much they made if their time on title was less than 90 days. Lenders want to see less than 10% of the after repaired value as the seller's profit. They also don't like to see the word "assignment" on a HUD from your purchase and they will ask to see it at your refinance. They don't want to see that you have been trying the sell the property on MLS since you have owned it and most require that it be unlisted for the previous 6-12 months. We recommend to our clients to refinance no higher than 80% of the appraised value. This avoids mortgage insurance, insures a quick exit strategy if you need to sell quickly for whatever reason and will most likely offer a cash flow from rent payments. Some clients will go higher to get cash to buy new properties, are getting a tremendous amount of rent or maybe they are just in the deal too high to do any less. Whatever the reason, you can refinance up to 100%, if you qualify. Before you refinance, you should have a game plan for the house, how long you intend to keep it, what is happening in the neighborhood. If you would like to learn more about the different types of funding available then you can visit our site at www.FinancialHelpServices.com. We make loans to Investors, homeowners and homebuyers to purchase, refinance and even consolidate bills in all 50 states.

Seller Financing: Another good source to fund your deals is to get the seller to finance it for you. Now this will not work all of the time or even most of the time as it takes a special situation to make this work. One of the things you always want to ask the seller is “what will you do if you do not sell the property” and if they say rent it out then this is a good seller finance possibility. You want to try and get the best terms possible from the seller based on what they could get as an interest rate at the bank. In fact, here is another thing you want to ask that is in your script. “What will you do with the money when you sell?” and if they say put it in the bank then compare the rate of return they will get versus you paying them a higher rate for giving you seller financing.

I hope you have enjoyed this article taken from my course called the Ultimate Buying and Selling Machine! which teaches how we buy and sell 5-10 properties a month, have them sold in less than 2 hours and never leave the office or look at them. For many more articles and a 10 part ecourse on how to create your own Ultimate Buying and Selling Machine! as well as over 50 training audio recordings you can listen to online, download and collect, simply go to www.LarryGoinsFreeOffer.com where you will gain instant access to all of this and 51 Exclusive Editable real estate investing Forms and Documents all FREE! You will also get two FREE real estate investing eBooks, A free Personal Coaching Profile to help you jump start your real estate Investing, FREE Nationwide Wholesale Property Listing Notification, FREE Weekly Training Teleconferences with Different Topic Each Week, FREE subscription to Larry Goins “Almost” Weekly Investing Newsletter, FREE Admission for Two to Investor Palooza 3 Day Training Event, FREE Admission for Two to Larry Goins 3 Day Boot Camp, Plus over 31 Exclusive Articles on real estate Investing and Much More! Just go to www.LarryGoinsFreeOffer.com. Thanks and I look forward to working with you, Larry Goins