First time funding?

[Timothy Franklin]

[GAH! just typed a whole long post to have the internet fail and lose it!]

Hello Bigger Pockets!

My wife and I are new investors with identified deal flow, a selected strategy, and have done a ton of research. We are having trouble figuring out which deals we should tackle first but are prioritizing wholesale to build capital. We are looking for lenders that understand the market (we are in Lousiana and are casting a wide net due to flexibility) and that will fund our first deal(s). The problem we are having is much of our current deal flow is below traditional lending terms (<$75K). We could tap equity, but want to build relationships and scale. Any thoughts, suggestions, or referrals on what first step to take are appreciated. 

Note: Our initial goals are to wholesale to build immediate working capital (targeting $150k) and hold for cash-flow to build 10k/mo FCF (free cash-flow).

We have made some cash buyer connections, identified and underwritten potential deals on hundreds of current deals, and developed professional relationships in our target community (cleaning, construction, governmental). 

[Patrick Roberts]

By private money, Im assuming you mean local people lending out their IRA funds and personal funds. The best way to find these are networking locally. Forums like this one, facebook groups, and REI meetups are the best options. Red Stick REI is a great meetup in BR if you're not already attending it - it's on the first Tuesday of each month.

Hard money, which is most commonly from an institutional lender (either a broker with a white label setup or a lending firm), is generally available, but you will need to meet experience requirements to obtain funding from these kinds of lenders. Almost all require you to have completed at least one deal, and most require 2 or more. The most common requirement I see is 2 deals in the past year or 3 in the past two years. Very few hard money lenders will lend when it's your first deal. 

Hard money and standard loans (Conv, DSCR) are unlikely to be available for deals under $75k. Most lender have a min loan of $100k, although some will go down to $75k. Under that, it gets very tough.

If you plan on retaining/keeping any of the properties you pick up (whether using hard money or otherwise), I strongly recommend you start working with a lender now to see what can be done about your credit. For almost any kind of permanent rental/investment property financing (whether Conventional, DSCR, or local bank), you are going to need a decent credit score to qualify. The last thing you want to do is use hard money to purchase a property you want to keep but then be unable to refi out of the hard money.

I think you're best bet for private money is going to be to network at the meetups (Red Stick REI, RING) and on FB/here. What I typically see investors do to get rolling is use a Heloc or cashout refi on an existing property to get the startup capital they need.