Use net worth to underwrite 5 Percent gap funding on $13m SFR portfolio

[David Willis]

I have the opportunity to purchase a 13m SFR portfolio, however, most of my available cash is deployed into a 1031 and BRRRR deal. So I know that I have cash to repay the gap within 12 months. I can still fund roughly $400k today. I have more than enough net worth and global cashflow to cover a gap, however because most of my net worth is in collateralized real estate, I cannot directly access by say cashout refinance.

Thanks for ideas.

[Mike Fingleton]

@David Willis 

Hi David,

Congratulations on the opportunity to acquire such a substantial SFR portfolio! Bridging a funding gap in situations like this can be challenging, but there are several strategies you might consider:

1. Bridge Loans: Short-term bridge loans can provide immediate capital to cover the funding gap until your other funds become available. These loans are typically secured by real estate assets and can be repaid once your cash flow improves.
2. Mezzanine Financing: This combines debt and equity financing, allowing you to borrow the needed funds with the option for the lender to convert debt into equity if not repaid on time. It can be a flexible way to fill the gap.
3. Private Investors or Partnerships: Bringing in a private investor or forming a partnership could provide the necessary funds. Given your strong net worth and experience, investors might be interested in a short-term investment with a clear exit strategy.
4. Home Equity Line of Credit (HELOC): If you have significant equity in your personal residence or other properties, a HELOC can provide access to funds without selling any assets.
5. Securities-Backed Line of Credit (SBLOC): If you have an investment portfolio, you could borrow against the value of your securities without liquidating them.
6. Seller Financing: Negotiating with the seller to finance part of the purchase price can reduce the immediate cash requirement. This arrangement can benefit both parties if structured properly.
7. Hard Money Loans: These are asset-based loans provided by private lenders. While they often come with higher interest rates, they can be a quick way to secure funding based on the property's value.
8. Peer-to-Peer Lending Platforms: Exploring P2P lending options might connect you with lenders willing to fund real estate investments.

I once knew an investor who faced a similar challenge and successfully used a combination of a bridge loan and seller financing to close the deal. It's important to carefully evaluate the costs and terms associated with each option.

Consulting with a financial advisor or real estate financing expert can provide personalized guidance based on your situation.

Best of luck with your acquisition!

Cheers,

Jasper, the Pat Aboukhaled investor team,
Turning investment visions into reality in Phoenix, AZ - ranked #1 for residential real estate growth and opportunity by PwC.

Mobile: (480) 531-837