If you’re just starting out in house flipping, you’re more than likely going to be a tad short on cash for real estate deals you’re considering. So how do you do those super-duper deals you hear so much about? How can you afford to not only buy that distressed house, but also pay for the rehab – even if you don’t have two dimes to rub together?
You ask good questions, oh wise one.
Those are very good questions. After all, most people who get into the property investment game don’t do it because they’re already rolling in dough. They do it because they WANT to be rolling in dough. This is a side of the property investment game that is not often covered in much detail, which is surprising because it is so critical to becoming successful.
So, how do you raise money to finance your house flipping deals?
One of the best ways to raise money to finance real estate deals is through a private lender. This is a person who loans money to real estate investors in order to take a piece of the deal, or simply to make a better return on his investment than he would via the stock market or through other kinds of investments.
Three freakishly brilliant ways to raise money for your next deal:
1. Hand Out Your Business Card: Surprisingly, this actually works. You should hand out your business card whenever you meet someone you think might have an interest in funding a project. It’s a numbers game, and you just never know when you’ll click with someone who has some money to invest.
2. Send a Monthly Newsletter: Some savvy property investors mail out a monthly newsletter that throws out ideas for investing. This helps puts the word out into the greater residential and commercial investing community in your area that you are looking for private money.
3. Visit Your County Recorder’s Office: You can find private lenders by reviewing all the mortgages issued in your county within the last, say, 12 months. There will be thousands of them, mostly banks, but you will run across the occasional investor who has lent money to fund a new mortgage. You might come up with 50 to 100 names, whom you can then contact via letter, provided the letter is not an investment offering.
Know the laws about private investing.
· Issuing a Security: If somebody is lending you money to fund your next deal and you sign a note promising to repay with interest, that note is actually a security, and there are state and federal laws governing the issuing of securities.
· Intra-State Offering: In many states there is turkey citizenship by property investment what’s called an “Intra-State Offering”, meaning if you, your real estate company, your deals (properties), and your lender are all in the same state, you will fall under that state’s intra-state securities laws.
· Federal SEC: Once you cross state lines, whether you, your business, your investment property, or your lender are in a different state, and if more than 20% of your dealings are across state lines, you are now regulated by the federal SEC.
Of course there is much more to learn about working with private investors, and any good investing class or mentorship program worth its salt will delve into this issue in much greater detail. The point is, you can get into property investing without using your own money, and make a fortune!