Finding private money lenders

[Jordan Crosby]

I’ve been flipping homes in Columbus, Ohio for about 2 years now. All using my own cash. However, I’ve realized I need to start leveraging my cash to maximize the amount of deals I can do. I am forced to pass up a lot of very profitable deals because my cash is tied up in the flips I’m working on at the time.

So I would like to know, for your first few financed flips, would it be best to go through a bank and get a conventional loan or take the time to find a PML who will want a higher % but continue to finance deals in the future?

Note: Credit scores aren’t an issue. I’m easily able to get approved for conventional financing. This is purely asking which type of lending you believe is the best route.

[Jake C.]

@Jordan Crosby It really depends on what your portfolio looks like. Do you own rentals that have equity? If yes, try to leverage these with a local bank to get a revolving LOC.

I was facing the same decision not too long ago and spent a lot of time weighing out the pro's and con's. 

My conclusion, and this was a conclusion based on my own situation, was that both hard money and conventional debt should be present in my toolbox.

I was able to find a bank that gave me a revolving LOC at 1% over prime, collateralized by a portion of my rental portfolio. I obviously want to use this as much as possible as it is cheaper and simpler than using hard money.

I simultaneously built a relationship with a local hard money guy so that if/when I run into deals that won't fit on my LOC, I can still execute.

Bottom line: If you can, get an LOC collateralized by equity in your properties. Short of that, use hard money.