Private Money

[Rusty Glines]

My wife and I have been evaluating and dissecting properties over the last few months.  We feel we have a few potential prospects.  Our only problem is coming up with the down payment.  We have invested our resources into education and lack finances to put down on properties.  We are looking for some help to get started.  We live in Ohio and find that there is some great potential for cash flowing properties.  Everywhere I have looked to borrow, you have to put money down.  I am seeking advice on where to go for help with financing with no money available from us.  Any feedback will be greatly appreciated.

Thanks! 

[Darrell Shepherd]

Originally posted by @Rusty Glines:

@Greg Zimdahl

 I have thought about the terms you mentioned.  I would be willing to partner up with someone.  I have heard of both equity partners and debt partners.  Coming from a small town it is hard to find someone to do so.  

I talked with a local lawyer today about private money as well.  He said he would keep an ear out for someone.  

I talked with realtors and others about seller finance, but no takers yet.  These were on properties that were already rented out and cash flowing.  

Hard money still requires some down payment of some sort.  At least the ones that I have talked to.  I will still keep searching.  

I have also come across line of credit.  I am just scared I guess to try that out.  

@Ivan Barratt

 I have been warned about the sharks looking to take advantage of newbies.  It just gets aggravating knowing what I know and still not being able to do some deals.  

I really appreciate the feedback and I will keep pursuing my dream of investing in real estate.  I have never been so passionate and driven to do something.

Never know, but for the most part nobody is going to bring you a private lender.  You have to uncover those yourself.  I can tell you for certain, no lawyer is going to recommend to a client or friend that he loan money for a real estate deal to a broke guy that's never done a real estate deal just because you asked him to.  Private lenders are relatives or friends who have money in lousy investments (cash, CD's, etc) that you can offer a greater return with more security to borrow.

Realtors have no clue how to present a seller finance offer.  They can ask the other agent to ask their seller if they'll do that, but your chances are pretty slim.  Nobody WANTS to do seller financing, they have to be lead down a path to where it makes more sense to do it that way.  Seller financing is usually obtained from talking directly with a seller and uncovering the opportunity.  "Do you need all this money now for something in particular, or would you like to grow it some?"  Or doing some sub2 stuff.  I've done one where the house was paid for and the guy was loaded (bought it for his son) and let me do interest only at 5% for a while, but those are pretty rare. 

Watch out for those "line of credit" guys.  If its from a legitimate bank, no worries.  There are guys out there peddling credit cards and such with crazy fees, and if they ask you for anything up front, run.  I've seen them wanting 8-10% of the credit line they 'establish'.

Nothing wrong with hard money (says the hard money broker), they serve a purpose in the market, but no, you aren't going to be able to do that without the right deal and some money to put in.  And I dont agree with the "go local" advice.  I loan across state lines and my best lender is out of California.  Shop it, for sure, but why limit yourself to local money?  It'll be more expensive.

Not trying to burst your bubble, but trying to get into real estate investing with nothing to invest isn't really a good thing.  There are all kinds of high dollar bumps in the road that you cant handle if you dont have some cash reserves.  I'm $10k over on one rehab, $7k over on another and I've been at this a while...just replaced a heat pump on a rental for $4k, too.  That stuff happens.  There's a reason lenders dont finance 100% of RE deals to newbies, that is a crazy high risk loan.  Actually crazy is a little soft, more like insane.  

My advice would be to get a license or find an investor to work for for a bit to get some RE knowledge and some cash built up before jumping in.  

Saying all that, I did my first one with none of my money. I took a foreclosure subject to, borrowed $25,000 from a private lender (my dad's secretary) at something like 20% interest, caught the payments up, did a light rehab and sold it for about $25k profit. I had been well trained, money in the bank, stellar credit, and my dad backing me, though. I screwed that thing up in a million different ways, btw. The only reason I made $25k was because I was $25k off on my ARV in the right direction...