@Kaitlyn Aragon
Hey Kaitlyn, I see you're adjusting your strategy... As you should be while you're positioning yourself to move forward on your 1st Investment. BP, as you're experiencing, is full of experienced investors willing to help guide you along the way. Keep doing what you're doing in that Regard.
We started with the Initial Fix/Flip strategy as well. About 2 weeks ago, we've decided to hold 99% of our Acquisitions local to the Charlotte area due to the High Growth this area is experiencing. Future appreciation is very likely and personally, I'd like our business to capitalize on that appreciation.
We initially looked towards investing in Charlotte, NC. The competition is currently too great for us. We are focusing on areas 45min-1hr outside of Charlotte. Much less competition in these areas, more distressed properties/sellers, higher % spreads in between Acquisition Cost / ARV, and less capital intensive overall to name just a few reasons.
HMLs can be helpful for Acquisition but depending on the price of the property, the fees can eat up much of your profit, especially if there's not much "meat on the bones". While HMLs advertise Points & Interest rates, you'll see there are MANY more Fees associated with this type of loan product, in addition to a lien being placed on your property and a short timeline typically to operate within before they foreclose if you're not able to exit/repay the loan. This is why having a SOLID plan in place is essential.
401(k) - My partner utilized this for our initial round of funding. You can borrow up to 50% of the cash value and you pay the interest back to yourself. Great Source!
DSCR loans are the GOLDEN eggs! Depending on the lender, your seasoning time will vary and determine, how much cash you can pull out overall. Some lenders will lend as low as $50K but again, the fees % in proportion to the loan amount will be high. DSCR loans are asset based, not personal DTI, and can in ideal conditions allow you to pull all of your money back out of the deal and then some, or a lot more. While they don't look at your DTI, they will, at least initially while building a relationship with the lender, check your credit score which will affect your rate.
Line of Credit - Most banks will want to see you in business for 12-18 months before issuing you a Business LOC. Great source of capital once you're able to acquire it. Overall low interest rate relative to other similar lending products.
Business Credit Card - A great way to start establishing your business credit. I would recommend opening a business account after creating your LLC at a LOCAL portfolio lender bank. These banks are relationship based and much of the underwriting process for issuing personal/business loans is kept in house. Using the big banks such as BofA, Wells, Etc can put you at a slight disadvantage if you don't have a rock solid credit score, and a long history with them, while you're getting started.
"If you find the deal, the money will find you" - So much truth in this saying with just one caveat.... Only if the Money knows about your Deal, and if the Money thinks you have the capability in navigating to a successful outcome of that Deal.
My advice to you would be keep doing what you're doing. Keep analyzing deals, studying the market, going to REIA meetings, getting involved and networking with other investors. I had a bit of an untypical start in my investing career, but I would also recommend bringing a deal to an experienced investor in the area you're looking to learn/invest in to observe the process of what a successful project looks like start to finish. This experience early on will be invaluable.
Good Luck!
Tony
