Folks,
I am a private lender, mainly for residential flips, and it kills me to turn away the vast majority of my applicants because they don't have the upfront cash to qualify for my loans. I require them to have substantial skin in the game because I don't want to assume all the risk in THEIR project.
I require a 35% (that's 35% of the purchase price) down payment and I also require that the borrower have enough cash reserves to get them through the project. I give 3 or 4 construction draws for 100% of the estimated rehab cost, but I give them in arrears of each stage of the construction, so the borrower must also have 25 - 33% of the cost of the rehab in reserves, as well as reserves to cover carrying costs.
But there is an easy solution to the upfront cash problem if you have a good credit rating. I know that your mama told you never to finance anything with credit cards, and to never use credit card cash advances because they kill you on the cash advance fee and the super high interest rate. But I personally have 5 credit cards ($90K in available cash that I treat as a line of credit), all of which have NO CASH ADVANCE FEE! The best one has a cash advance interest rate of only 8% and the worst 10%. That's better than most private lenders offer (including me)! My credit limits on these cards range from $10K to $25K.
4 of these 5 credit cards come from credit unions. There must be many, many more of these no-cash-advance-fee credit cards available, because I found 5 or 6 and I haven't even looked that hard. If you can find a list of credit unions online, you could go to the website of each and look up their credit card terms.
There is one no-cash-advance-fee credit card that I found that is not from a credit union. It's called the Barclay Card Ring, interest rate for cash advances at 8%. Apply here: https://www.barclaycardus.com/apply/Landing.action...
There are different requirements for becoming a member of each credit union, but they usually leave you an easy way to qualify to join. So for instance, the Pentagon Federal Credit Union was set up for employees of the Pentagon, but if you join the "Voices for Troops" organization (it'll cost you $15 the first year and you don't have to renew after that) they'll let you join PFCU and get their awesome Pentagon Promise Visa card: www.penfed.org/Penfed-Promise/
You do have to be careful when planning out your cash flow, though. Most of these cards require monthly payments of something like 2 or 2.5% of the outstanding balance.
On that topic, you really should plan out your cash flow for every month of your flip project. For example, let's say that you're doing a flip in which the rehab is planned to take 2-3 months, then it will take 2 months to sell it and another month to close, so that you're holding the property for 6 months. You should have your cash flow all planned out month by month so that you make sure to have enough reserves. And don't forget the carrying costs - insurance, loan payments, property taxes, water, sewer, electricity, etc. Then make sure to add in a buffer as well because you will undoubtedly exceed your rehab budget, unless you've got years of experience.
