How to use a private lender to buy rental?

[Jonathan Meyers]

Hey everyone, I have access to a private investor who is a relative that is very established in commercial Realestate. They want to help me secure some residential deals. What are the best strategies or success stories using private money? I'd like to buy and hold on some properties but having trouble figuring out how to refinance the homes so that I can get the money back for the investor and have the property with none of my own money down. Or should I just try to do flips? Suggestions or advice?

[Bryan O.]

@Jonathan Meyers one of the strategies of using a private lender for long term holds is where you buy gently loved (beat up) homes and renovate them. Once that is done, the bank will have it appraised and lend (usually) up to 75-80% of the appraised value. If you did your thinking and doing correctly, you will have forced that 20% equity by the value of the repairs. Here's a simple example:

Price: $50k

Renovation: $30k

Holding costs: $5k

Renovation complete! Appraisal and refinance with the bank: $130k appraisal. Bank will finance $104k, you can pay out your lender and get a little bit of spare money as well.

I made the numbers up, but that is the concept.