All Forum Posts by: Stanley Yeldell

Hi everyone,

I’m a new private money lender (PML) looking to get involved in real estate deals. I have available capital and am interested in funding smaller, long-term investments, particularly for single-family homes and duplexes in rural or less competitive areas. My goal is to provide financing for down payments or bridge loans, especially in owner-financed situations.

I’m excited to connect with real estate investors looking for funding and learn more about the process of lending in this space. If you’re an investor or someone who has experience with private lending, I’d love to hear your thoughts or any advice you may have as I get started.

Looking forward to connecting!

To find private investors, especially individuals for real estate deals, here are a few options:

1. Networking Events: Attend local real estate investment clubs, meetups, and industry conferences. In-person interactions are great for building trust with potential investors.

2. Real Estate Platforms:

   • BiggerPockets: A robust platform for connecting with private lenders and investors.
   • Fund That Flip, PeerStreet, Groundfloor: Online platforms connecting investors with real estate projects.

3. Social Media Groups: Facebook and LinkedIn groups dedicated to real estate investing often have private investors or lenders looking to connect.

4. Personal Network: Often overlooked, but friends, family, and colleagues may know individuals interested in investing.

5. Private Money Brokers: If you're working on wholesaling deals, you may find brokers who have established relationships with private money lenders.

6. Real Estate Agents: Some agents have connections with private investors, especially those focused on investment properties.

For your 50% LTV, it's good to approach investors who may be interested in lower-risk, high-equity deals.

Key Factors for a Good Seller-Financed Deal

1. Cash Flow: Rental income should exceed monthly payments (PITI) by at least 1.25–1.5x.
2. Purchase Price: Compare to ARV and market value for fair pricing and equity potential.
3. Interest Rate: Aim for competitive rates; higher rates must still allow positive cash flow.
4. Amortization/Balloon Terms: Favor longer amortization and align balloon payments with your exit strategy.
5. Down Payment: Lower upfront costs reduce risk but should meet the seller's expectations.
6. Flexibility: Seek no prepayment penalties and fair late-payment clauses.
7. Property Condition: Ensure the property’s condition matches terms through inspections.
8. Seller Motivation: Assess the seller’s willingness to negotiate favorable terms.
9. Exit Strategy: Have a clear plan for refinancing or payoff at term end.
10. Portfolio Fit: Ensure the deal aligns with your financial goals and risk tolerance.

Vetting multiple deals and consulting professionals is crucial to making sound decisions.

Creative & Seller Financing Overview

Seller financing allows the seller to act as the lender, enabling you to purchase without traditional bank involvement. Terms such as interest rates and payment schedules are typically negotiable.

Combining creative financing with seller financing can include strategies like:

• Subject-to and Seller Financing: Taking over the seller's mortgage and financing the equity portion through the seller.
• Lease Option: Renting with an option to buy while negotiating seller financing for part of the purchase.
• Wraparound Mortgage: Keeping the seller's existing loan while they finance a new loan that includes the balance.

To proceed, consider connecting with experienced investors, understanding local legal implications, and attending networking events to gather insights.

Financing Your First Flip with Low Cash

Hard Money Loans (HML): Covers most costs but requires 10-20% down, with 10-12% interest. Use gap funding (credit lines, partners) for the down payment.

Private Money Lenders (PML): More flexible, relationship-based funding with lower fees. Network through real estate groups.

Seller Financing / Sub-To: Take over payments or negotiate terms with sellers to minimize upfront costs. 

  Equity Partner (Joint Venture): You find & manage the flip, they fund it—split profits 50/50.

Next Steps: Find lenders, network for private money, explore seller financing, and set up gap funding.

Want help finding lenders or structuring a deal?

Yes! While most investment loans require at least 15-20% down, there are a few creative financing options that allow for less than 10% down:

1. Conventional 5% Down Loan (Owner-Occupied)

If you live in the property for at least one year, you can use a primary residence loan with as little as 5% down.

After a year, you can convert it to a short-term rental (STR).

Loan types: Conventional (Fannie Mae, Freddie Mac)

2. FHA Loan – 3.5% Down (Owner-Occupied)

Buy a duplex, triplex, or fourplex, live in one unit, and rent out the others.

You only need 3.5% down with a 580+ credit score.

STRs are typically not allowed initially, but you can transition over time.

3. VA Loan – 0% Down (Veterans Only)

If you're a veteran or active-duty military, you can buy a 1-4 unit property with 0% down.

Must owner-occupy for a period before renting out.

4. USDA Loan – 0% Down (Rural Areas)

Must be in a USDA-eligible rural area (check USDA’s map).

Owner-occupancy required initially, but STRs might be possible later.

5. DSCR Loan (10% Down Possible)

Debt-Service Coverage Ratio (DSCR) loans are based on the rental income, not your personal income.

Some lenders allow 10% down, though 15-20% is more common.

6. Seller Financing or Private Money

Negotiate low or no down payment directly with the seller.

Private lenders may offer low down options if you find a great deal.

Anthony, your passion for creating a micro-home neighborhood is inspiring! Here are some suggestions to help you secure funding and move closer to realizing your vision:

1. Explore Potential Funding Options

Private Money Lenders (PMLs): Reach out to private individuals looking to invest in real estate. Platforms like BiggerPockets, local REI meetups, and Facebook groups can connect you with investors seeking opportunities.

Joint Venture Partnerships: Consider partnering with a seasoned developer or investor who can provide the capital while you contribute your vision and operational effort.

Hard Money Loans: If you've identified a property, some hard money lenders may fund the purchase and development based on the future value (ARV) of the project.

Crowdfunding Platforms: Sites like Fundrise, Groundfloor, and RealtyMogul cater to real estate developments and could be a great way to gather capital.

Seller Financing: If the land seller is open to it, negotiate terms to finance the purchase directly with them.

2. Strengthen Your Proposal

Develop a Business Plan: Include:

Vision: Your goal of creating a micro-home community.

Market Research: Show demand for affordable or small-footprint living in your area.

Financial Projections: Break down costs, ARV, and anticipated ROI.

Experience: Highlight your previous fix-and-flip and demonstrate your learning curve.

Present a Solid Development Plan:

What is the size and scope of the project?

How many units, and at what price point?

What is the timeline?

3. Leverage Local Resources

Economic Development Grants: Check with your city or county for grants or incentives aimed at affordable housing or community improvement projects.

Local Banks or Credit Unions: They may be more flexible than larger financial institutions, especially if your project aligns with community needs.

Partnership with Nonprofits: Collaborate with organizations interested in affordable housing or sustainable living.

4. Network Strategically

Real Estate Meetups: Attend networking events to meet potential partners, mentors, or funders.

Professional Organizations: Join groups like the Urban Land Institute (ULI) or the National Association of Home Builders (NAHB) to connect with developers and investors.

Pitch Events: Look for events that allow you to pitch your idea to angel investors or venture capitalists.

5. Address Your Financial Profile

Bridge the Revenue Gap: Highlight your equity in the duplex and use your sale proceeds to demonstrate “skin in the game.”

Partner to Compensate Experience: A financially strong and experienced partner can help offset your limited track record.

Focus on the Land Deal: Secure the land at a good price, as it’s a crucial step in gaining credibility and attracting partners.

Final Thoughts

You’re entering an exciting and impactful space in real estate development. Focus on positioning yourself as a problem-solver with a compelling vision, and don’t hesitate to seek mentorship from experienced developers. With persistence and strategic networking, you’ll find the right partners to bring your micro-home neighborhood to life.

Practice Pitching: Sellers may not be familiar with subject-to deals. Be ready to explain the benefits and address concerns confidently.

Key Questions to Ask Yourself

Property Cash Flow: Will the property generate sufficient cash flow to cover the monthly payments, taxes, insurance, and other expenses?

Exit Strategy: What’s your plan if you can’t refinance or sell the property after 24 months?

Market Conditions: Is the property located in a growing or stable market? Do you anticipate appreciation to justify the purchase price and financing terms?

Reserves: Do you have enough cash reserves to handle unexpected costs or delays in refinancing?

Private Money or Hard Money Loan

How it works: Short-term loans from private or hard money lenders to purchase the lot and finance the construction.

Benefits: Easier approval and faster processing, focusing on the property value rather than your income.

Downside: Higher interest rates and shorter loan terms (typically 6-18 months).