The funding of the entire rehab is very attractive to investors, and putting 15% down is a reasonable commitment in order to get a deal funded. If you have experience, you can get these deals done in months, and once that property sells, you’re well on your way to using those funds from the sale to finance that next project. Private lenders don’t work off federal regulations, meaning they can work with more flexibility. With that flexibility, they are granted the freedom to make their own terms and adjust the fees on these loans. Many private lenders also lend nationally, so you are opening yourself up to more opportunities and new markets.
The ability to get fast funding is attractive to investors of course, but it is important to caution that when working with private lenders, many will underwrite the borrower, including running a credit and background check, as well as verifying cash reserves in order to justify getting the loan funded. Though there are many advantages to private lending, there are definitely some handicaps to consider regarding capital if you are an investor. Private lenders usually require cash at closing, so if your plan is to use a retirement account in order to fund your deal, it is possible that would either be a disqualifier or there would be a reduction in leverage. Whether you’d be funding the closing costs yourself, or with partners, keep in mind that having liquidity at closing as well as to cover debt service will be a requirement to get your loan approved.
Partner with House Flipping Investors
One of the more popular and proven ways to working as an investor with little to no capital is to go into business with a partner. Some of the benefits of this method that can be enticing to investors is the fact that you are able to put less money down since you’d be partnering with one or more investors, as well as adding their experience to your resume. This could help you get better terms and potentially increased leverage.
Keep in mind that when you partner, you will be splitting the return on investment, but it is important to consider the situation and the benefits of working with partners. With inflation running rampant right now, you can still build your resume by flipping properties while putting less money down, and in turn building relationships that can lead to more opportunities for you down the line. Whether it’s getting invited to real estate events, tradeshows or even joining something as simple as a Facebook group, you will open yourself up to more networking opportunities as well as familiarize yourself with other markets that you may have never considered entering previously.
Seller Financing
If going through a traditional or private lender isn’t an option, seller financing is a great option that allows the investor to work directly with the seller of the property to get funding. With this approach, there is more flexibility regarding negotiations for approval. Traditional or private lenders are more than likely going to require a higher down payment as well as a minimum credit score in order to qualify. With seller financing, these questions may still come up, but you will have the leeway to discuss a lower down payment and if credit is lower, you will have an opportunity to explain the circumstance. Another area where this method can be advantageous is if it is a rural property. There are a lot of great properties out there on the market that lenders may not touch because that property is in a rural area. Seller financing can be a great outlet for investors looking at these types of properties.