What's the best way to start looking for investors?

Question

So...I'm VERY new to asking or convincing someone to help me out financially with my dreams. My passion for a long time has been to flip houses and have rentals as my primary source of income. After trying for many years to raise a family AND save... I've only done one thing successfully...my kids are pretty cool.

We live in a neighbor in St. Louis that is in a housing boom! I have watched our house gain $100K in value in 7 years. So here's my current situation, there is a house across the street from me with a woman who will be put into a senior home soon and her house is a gold mine, it's also a wreck that needs to have major repairs or be torn down. Quarter acre lots are going for $350K, her house in good condition would easily get $325K. I have approached her son and asked if he would sell to us when the time comes to place his mom in a home and he agreed that wouldn't be a problem. I asked him to talk to his brother and come up with a price (I'm thinking I could snatch it up for $200K, maybe less, maybe slightly more) and get back to me so I can get the ball rolling. Here's where you can help!

How do I come up with the cash or ask someone to invest in me and this house's potential? I am a visionary and LOVE to network, but lacking in the whole "will you share your money with me" approach or conversation starting skills.

Thanks a BUNCH!!

Amy Zlatarich · Answer

@Andrew Michael that is GREAT advice! THANK YOU! I will start digging deeper into learning about the wholesale market..anything to get my feet wet. My husband and I gutted and rehabbed a house right before the market dropped, but we had the cash then and we're able to fully fund the project, I really don't want all of my eggs in one basket ever again.

Loads of thanks for the info!

Amy Zlatarich · Answer

Thanks @Michael Bardelmeier! I found a group meeting in my area tonight and I'm going to try and make it!

Amy Zlatarich · Answer

@Dacia Ray its a slightly sticky situation, in where I think the sons have mortgaged the house to fund some of their ventures. When the time comes that they need their mom in a home or they need to sell the house, I know they'll want the cash fast.

Andrew Michael · Answer

Hi @Amy Zlatarich

My first question would be how much working capital do you have to bring to the table?  Do you have reno money and just need to cover purchase costs?  Do you need 100% financing?  Even with a hard money lender, they will require you to have some skin in the game.  Anyone who offers 100% financing, run.  They are either going to steal your EMD or kill your profits on the back end with points, rates, and fees.  If you do have some money to work with then hard money is an option.  There are hard money lenders that will work with you even with your lack of experience but this could be costly as the interest rates/ holding costs will most likely be on the higher end.

Owner financing is an option as mentioned above.  I have used this in the past and it has worked beautifully.  This only solves half of the problem however as you still would need help/ someone experienced running the project.  Also, you would need to make sure you have a proper written contract with the seller so you don't renovate the home only to have the owner turn around and sell it and cut you out of the profits and reno costs.

If I were you I would partner with an experienced investor who has cash.  This would open up tons of options for you.  If you could still work out the owner financing aspect then that's a huge bonus and value you are bringing to the deal.

I would encourage you to step back and really see the value you are bringing here.  By you saying "will you share your money with me" makes me think you are not appreciating what you have here and it sounds like timid verbiage.  You have found a deeply discounted property, negotiated a price, and may have possibly secured owner financing.  This is a big deal and there is real value here.  Instead you should be saying "I have a deal that will yield a huge return on your money, you'd be a fool not to invest with me"

By partnering you will gain so much valuable experience and be able to leverage your time, risk, and money.  I think in this situation this is your best bet.

Last but not least, if you do not feel like figuring out money and the whole rehab process you can always wholesale it.  This will not fetch you the highest return possible but it will be a quick return for virtually no risk.

Good luck!

Michael Bardelmeier · Answer

Hi @Amy Zlatarich. You've got a great strategy with this house.  My [very limited] experience is that Hard Money lenders won't work with you if you don't have any experience investing in real estate.  So you may want to partner with an experienced investor who's completed a fix n flip or has rental properties.  This way, you gain the experience that the hard money folks look for (for the next fix n flip you find), and you have someone to learn from during the process.  To find yourself an experienced investor, I'd go to local REI meet ups (there are tons of them here in SoCal) and you can meet some great people who are very generous with their time and advice - you may find someone who'd be interested in going in on a joint venture (JV) with you.  Of course, be cautious and don't disclose too many details about the house until you have it under a written contract.  Good luck!