@Bryan Johnson I had originally planned on using a HML but ended up opting not to due to the high interest rates and fees that would have crushed our profits. So the purchase was funded through our own cash, 401k loan, and credit cards. The rehab was funded through my business partner whom owns his own construction company. Once the house sells, we will pay ourselves back our own capital investments and leave 100% of the profit in the bank so we can move onto our next deal. Before I go into how I funded it, I know I'm gonna get crap for using credit cards (even though its 0% APR) but I'll explain why I leveraged my credit cards.
Our Cash:
The purchase was mainly funded from my cash reserves which were made up of my and my wife's income. We stuck away 15% of each of our paychecks into a separate checking account that was only for real estate rentals/flips. Her and I both get a yearly bonus through our day jobs and although the bonus was not large it still went directly into the investment fund. My wife and I also drive paid off cars and live pretty frugal or try to anyways. Mine car is a high-mileage 2006 Jetta TDI and hers a 2010 Altima. Like Dave Ramsey says, "Live like no one else now so you can live like no one else later!"
Credit Cards:
We also used credit cards like I mentioned above. Please note ALL of our cards had a $0 balance. I would not suggest this method to someone who gets into credit card debt easily. Anyways, I was trying to think of ways to come up with more capital and a few weeks later I received an offer from one of my cards in the mail. It was a blank check with a 0% APR for 12 months with a 3% fee and the minimum payment was 1% of the balance. Did the quick math and it was thousands and thousands of dollars cheaper than a HML. Following this offer I went online to my other cards and two others had the same offer but instead of a blank check they were able to wire the money to my checking account. The terms were very similar with the APR being 0% and ranging from 12-18 months and the fee was 3% then a 1% minimum payment on the remaining balance. I also requested a credit limit increase on each card PRIOR to accepting the offers I was receiving.
Example: We had a Chase Card with a limit of $13,300. We took the 0% APR for 12 months offer and wired $12,730 to our account. The fee was $381.90 and the minimum payment is 1% of the balance. So $12,730 + $381= $13,111.90 or $131 for the first months payment.
401k Loan: Pretty straight forward. I took a 401k loan to come up with the rest which wasn't much.
Not boasting but in 2012 I had a credit score in the low 400's and one was in the 390's. Growing up my parents lived paycheck to paycheck and we didn't have much to our name but we did have a ton of debt. I learned the hard way by spending money through college and digging holes financially that I couldn't crawl out of. I defaulted on my student loans early on after college and had no choice but to educate myself on how money works and how a credit score works. They didn't teach me any of this in school. Within 3 calendar years and in 2015 my score was over 650 and today it is over 750.
P.S. Sorry for the long response and telling more than you had asked me but I get excited about this stuff!!!
