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]

When you say you're looking for a lender, are you looking for hard money, permanent financing for holding properties in your portfolio, or something else? I see that you plan to wholesale, and this typically doesn't require lending/a lot of cash unless your plan is to flip/hold the property. Just trying to understand what you're looking for. 

I'm originally from BR and still invest heavily and lend there. 

[Timothy Franklin]

Hi Patrick,

I am looking to identify hard money lenders and private money lenders, as well as seeking advice on how to begin funding the first few deals we take on (or if we should even use outside capital initially) My personal credit has been a 15 year battle (due to 2 divorces, multiple identity theft incidents, and most recently a breach of contract dispute with a creditor (they want me to keep paying them but not provide agreed upon services). I thought it best to build these relationships early with smaller deals and scale up rather than come out of nowhere with a larger request later (after using solely personal capital on dealflow).  

[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.

[Timothy Franklin]

Thanks Patrick, I will definitely check out the meetups, but I suspected there would be a history requirement but I know everyone's journey is a bit different.  Currently I have about $1M sunk into a previous business venture, so I expected I would have to pull some equity out but wanted to explore all options first. I have been battling with the credit bureaus for 15 years between 2 divorces, and multiple incidents of identity theft (the untold effect of military service). I appreciate your response and hopefully we will get a chance for an in-person at one of the meetups.

[Patrick Roberts]

Quote from @Timothy Franklin:

Thanks Patrick, I will definitely check out the meetups, but I suspected there would be a history requirement but I know everyone's journey is a bit different.  Currently I have about $1M sunk into a previous business venture, so I expected I would have to pull some equity out but wanted to explore all options first. I have been battling with the credit bureaus for 15 years between 2 divorces, and multiple incidents of identity theft (the untold effect of military service). I appreciate your response and hopefully we will get a chance for an in-person at one of the meetups.

The meetups are an excellent place to meet equity partners and private lenders and build relationships with them. I can introduce you to a few people who can likely help at Red Stick REI in January if you'd like. Happy to help.

[Timothy Franklin]

Thanks Patrick, that would be great. I'm going to do some research on the meetups in the area and will check them out. Hopefully by then I will have at least a couple wholesales under my belt.

[Patrick Roberts]

Quote from @Timothy Franklin:

Thanks Patrick, that would be great. I'm going to do some research on the meetups in the area and will check them out. Hopefully by then I will have at least a couple wholesales under my belt.

Red Stick REI and The RING are the two big ones in the BR area. Red Stick has an active FB group

[Jacqueline Wright]

Hey Timothy, just curious, are you specifically looking for private money or hard money?