Alternatives to Hard Money Lenders

[Tony Valdivia]

I have currently been using hard money lenders for most of my deals, but am looking for a cheaper source of funds.  I operate in the Houston area (with properties in Katy and Richmond) and in the San Antonio area.  The hard money lenders I am currently working with are charging 12% with 2 points.  I did find a San Antonio bank that has much better rates, but they need 30 days to close and sometimes I need to close quicker.

In my business model, I buy with a hard money loan, do the rehab and then rent it out while refinancing with a conventional loan.  Occasionally, I might flip a property instead of rent it.

Any advice on alternative sources of funding and how to find them would be appreciated.

[Bryan Hancock]

A line of credit is unlikely to work then.  I am not sure how you'd collateralize the line enough to get the cash you need.  

Partners would always help, but that is likely to be more expensive than hard money.  Banks are likely to be too slow even with a good relationship.  

Hard money is likely your least bad option at this point.  12/2 really isn't bad.  I know some of the hard money lenders in San Antonio and many would charge more.  Seattle Funding Group lends in Texas.  You may try contacting them.  I surveyed hundreds of hard money lenders a few years ago and they were the cheapest I found for new development projects.

The only other option is to do the hard work of finding private money folks.  You can decrease your cost of capital to around 8% or so using private money folks, but it is going to take a lot of work and distract you from your main business.  You may be better off just using the hard money relationships you have and focusing on doing more deals to build up your own reserves and own more equity in future deals.  It is always a good idea to learn how to raise money though and in the long run this is probably the most valuable skillset there is in real estate investing IMO.  

Note that there is also a new crowdfunding portal out of San Antonio called RealMassive.  I haven't worked with them so I can't vouch for how good they are.  They are using the new Texas-based intrastate exemption to find non-accredited investors.  They may be able to attract capital for you for less than 12/2.  You should try contacting them.