I have bought properties at the auction; however, because of limited funds, I have to buy one at a time, deal with a cash for keys/eviction if occupied, rehab, resell, all at a one at a time scale. If I want to be able to handle more properties at the same time to try to increase profits, is there any advice on where/how to get additional capital to invest with? I haven’t finished an exhaustive search of all financing companies, angel investors, family and friends, etc., but since I have only bought a few properties, I am finding it quite difficult to secure attractive line of credit financing for a variety of reasons (High risk business, low max ltv/high cost of capital, not an established company, etc.). Am I stuck buying one at a time for potentially years until I make enough profit to comfortably buy two at a time? Although of course I’m biased, besides the “one at a time” problem, I feel my business model is just as competitive/effective as these established companies that buy properties almost daily. Any help is greatly appreciated.
A few possibilities:
Leverage existing friends, families, coworkers, acquaintances. Basically find someone who is willing to take a chance on you despite your limited experience.
Look for a partner among your competitors. Perhaps there is someone else down there who has more capital but limited time. By pooling resources - money, expertise and time - you may be able to do more. Just be careful to create a real partnership so that no one can accuse you of colluding with a competitor just to get better deals.
Reach out to hard money investors. Some like the Norris Group specialize in working with investors. They may only give you 60% LTV, but that might be enough to stretch your current capital to two at a time and build your track record faster.
Best of luck.
Thanks for your reply Sean. Just to add, since I have been at a one at a time scale with buying and choosing which repairs to do and reselling, I have done everything, besides the actual remodeling work, myself. So although it may have not been the best use of my time to do all the work myself at a one at a time scale, at least going forward I have experience with everything from A to Z. I have worked on possibilities 1 and 3 you mentioned with some good results (I will still keep my eye out for better terms on hard money), and there is potentially a lot of room to grow with Option 2. Now that the last resell I did has closed and I have my money again, I will really try to devote time to find partners and investors so I do not have to buy, fix occupancy, and resell at a one at a time scale. I will try contacting the competitors I have already spoken to about a way to work together, and maybe strike up a conversation at the auction steps with others, if you have any recommendations where to find partners and investors for this type of investing, please let me know. I am hoping I will find a situation where I am still able to make the final decision on which property to buy and what repairs to do because that is the way I think I will feel most comfortable with my money is involved. Thanks so much for your advice and help.
What County(ies) do you buy in?
There are a couple lenders who will loan 60 to 70% of what you paid at sale. One company I saw a solicitation for is in LA. Another is in the Bay Area.
The Nikols Company will provide a line of credit funding 75% of what you paid at sale at a 9.75% interest rate.