Folks -
Here iards a little trick that maybe you can try. I recently got a question from a friend of mine. He wanted to know how to make sure he doesn’t get in too deep, while making some quick cash when leveraging a property using “OTM” (other people’s money).
I gave him this little tidbit and thought I would share it with The Flip Board.
Try using Hard Money Lenders….
A hard money lender is a person or company who has cash to lend you, but wants a higher return on the investment and usually wants it paid off in a relatively short period of time. (Ususally within a year or two for the ones I use…) Credit is negotiable and having a good relationship with your hard money lender is absolutely key.
First, have an exit strategy - a plan to fall back on when the property doesn’t sell or a deal falls through. My exit strategy for hard money loans is simply this: I make sure I am approved to finance a property at 80% with a traditional mortgage lender before going in. So when any improvements are made, I immediately have it refinanced. This enables me to pay back any hard money I borrowed with the proceeds from the re-fi. This strategy also mitigates 80% of the money borrowed. 20% doesn’t hurt as bad if I can’t sell, refinance or rent the property.
Next, make sure that all of your deals have an up side before you buy. ”Buy and Hold” will not work with this kind of strategy. Here, we look for the quick score and look to either sell or rent the property, post-haste. We do this because we pull out equity in a relatively short period of time after we buy the property to pay off any loans and cash out.
I hope this works for you!
-Richard, www.TheFlipBoard.com
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