Non conventional Lending

[David Mueller]

Hi, I am looking for some information as I am brand new to alternate financing. I am wondering the best loan process of purchasing off market properties not using a conventional bank. Down payment, hard money, dscr loans, helocs. 

This may be a very broad question, in which case my apologies. Any info appreciated! 

[John Warren]

@David Mueller I love using HELOCs, and have done this strategy multiple times over my career. I also have done well with hard money several times. DSCR was not a strategy I have used, but several of my clients have done very well using these if they didn't have a W2. That seems to be the main place people get value out of DSCR is if they cannot qualify for conventional financing.

I think both a HELOC and a hard money loan are really something you should consider a bridge financing mechanism. You aren't meant to hold these debt types in place for very long as they have big issues over time. The HELOC will eventually require you to amortize most of the time. The hard money loans typically will require a pay off in 12 months or 18 months or something like that.

When I have used hard money, I have focused my energy on getting the project done as quickly as possible so it qualified for traditional financing. This has worked out great for me.