How to invest into another property

Question

I'm in a situation where I have one property that is paid off.This is my only rental I have.Im trying to start wholesaling to build my capital so I can invest into another property.Is there anyway way I can get an HELOC or refinance it so I can invest into another.By the way my credit is not so good either.Someone please help me out here

Brent Coombs · Answer

@Joe Villeneuve It seems to me that when it comes to borrowing capacity, having 100% ownership of an income producing property should trump an otherwise poor credit rating(?) If he can't borrow ANYTHING against it, there must be something else going on that has been left out of the equation so far visible to us.

Regardless, many newbie Wholesalers are in that bad-credit boat, and SOME of them, undeterred, actually get started wholesaling (in the manner I laid out above). Go for it...

Regardless, many newbie Wholesalers are in that bad-credit boat, and SOME of them, undeterred, actually get started wholesaling (in the manner I laid out above). Go for it...

Neil Aggarwal · Answer

There should be private money available in your area to get cash against the rent house you have paid off.  It is worth something and can be used as collateral.

Joe Villeneuve · Answer

Answers:

1 - They can be either Cash Partners, where they put in the cash either after the deal is done by buying into an existing deal, or at the start where they are the suppliers of the cash needed to buy/rehab/etc...

....or, the Credit Partner, where they would be the partner that guarantees the loan....

...or, both.

2 - Any of the options you listed can, and have been used by many others to make deals work.  It all depends on the parties involved, and what they agree on.  I prefer to just make them my partners and get a % of the deal.

You will always get those that won't do it for any reason, and that's fine...their loss.  What I have found, is if you structure the deal (and the returns) correctly and fairly, you will have far more investors that want to do it than don't...and can't wait for the next one to do it again.

Eva Salas · Answer

@Marcus Mccluster

You never know until you ask, and if they do say yes, but at a higher interest rate, you can compare the bank's cost to that of having a "credit partner".  A credit partner, and I have never heard of or used one, would not come cheap either, I would think, given the same reasons the bank may not want to do your HELOC.

Frank B. · Answer

@Joe Villeneuve How does having a credit partner work? Are they typically putting any capital into the deal, or are they guaranteeing the loan?

How are credit partners typically compensated for their participation? Is it a flat fee, some % of the profit from the deal, or something else?

Marcus Mccluster · Answer

@eva

@Eva Salas no I haven't yet because of my credit I thought my credit would have to be good to take out a HELOC

Eva Salas · Answer

@Marcus Mccluster Have you gone to the bank yet to ask them if a HELOC is a possibility, and if so, at what interest rate? I would at least talk to them first, then take the partner route if $$ was unavailable from the bank.

The best of luck to your new wholesaling adventure!

Joe Villeneuve · Answer

What you need to do is put a presentation together with the numbers...specifically how the partner makes money, and present it at your local REIC meetings as a handout.

Marcus Mccluster · Answer

@Joe Villeneuve ok great advice and sounds good thanks

Joe Villeneuve · Answer

Your credit score will have an effect on your ability to borrow, regardless of whether or not you own the property with 100% equity.  This is a residential property.  The lenders look at the person getting the loan first, and the property 2nd.  If this was a commercial property, it would be the other way around.

You are going to need a credit partner...and that's not a bad thing.  If you do the numbers, the speed and quantity you will be able to do using the partner trumps the loss of revenue due to the sharing of the cash flow.  All you need to do is the 3rd property, and if you gave away 50%, you would be ahead...and still moving forward just as fast.

I would still recommend that you pursue wholesaling, in addition to the partner/refi plan.  This way, you can accumulate enough funds to buy an added property for all cash...and get an added credit partner to produce another line of repeated refinances...just like the first line.

This would be an example of taking a small step backwards, in order to take an enormous leap forward.

How to invest into another property

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