In a volatile real estate market, here are 4 important places to get funding.
Raised rates, tightened money. Lenders are lending you less now. You’ll have to bring in more money to every closing. Where does that money come from? How do you win in this market?
Let’s go through the roadmap we use with all of our clients in this situation. Where you’re at with credit and assets helps determine your best strategy to get the money you need to fund gaps. Here are the 4 options for funding in a volatile real estate market, whatever your situation.
1. Good Credit and Assets
This first strategy is best for someone who has good credit and a real estate asset. This could be their owner-occupied home or a rental or commercial property.
If this is you, we always suggest starting with a line of credit. For a single-family property, this could be a HELOC (home equity line of credit). Or for a commercial property, just a bank line of credit.
This can be the best pool of gap funding because there are no transaction fees, and the money is always available.
There is a huge disclosure we remind all our clients of when we recommend any type of credit. Always treat credit like a loan. This means a couple of things:
- Never use this money for your personal use.
- This money should be used for your real estate project only.
- Always pay credit back completely as soon as you have the funds.
Not following those 3 rules is the quickest way to lose at the real estate game.
2. Good Credit But No Assets in a Volatile Real Estate Market
What’s your option if you have good credit, but no real estate? We usually recommend unsecured lines of credit or 0% credit cards.
For these products, you could take money off them to use toward down payments, the fix-up, etc. You can get these from local banks or national companies.
Make sure any credit card you use for real estate investing is 0%. An unsecured line of credit will be close to 10-18% simple interest (still cheaper than hard money or other gap funding if needed for one project).
We help our clients get these kinds of products all the time. If you have any questions on these, please reach out.
3. Real Estate Assets But Poor Credit
What happens if your credit is not so good but you do have real estate?
Then you can come to someone like us – a local hard money lender. We do this all the time for business owners, real estate investors, and whoever needs a gap loan of any kind. Credit doesn’t matter as much to most local hard money lenders, as long as you have equity in your real estate.
4. Poor Credit and No Assets
This fourth option is a catch-all secret: it works if you have no assets and bad credit… But it should also be a tool in every investor’s belt.
We call this funding method “real OPM.” OPM comes from real people who want to invest their money but not their time in real estate. They don’t come from a lending institution – this is your neighbor, your family, your old college friend.
Banks are offering low savings interest rates right now, and lending to you could get an average person a much better return. These OPM lenders don’t necessarily care about your credit, your income, or what assets you have.
All the top real estate investors, regardless whether it’s a volatile market or not, always have OPM partners who help them fill gaps and fund transactions.
Winning in a Volatile Real Estate Market
To be a successful real estate investor, you need leverage.
The key to winning in a volatile real estate market is to understand your situation, find the right strategy, and always treat your financing as a loan.
For guidance on OPM, download our free OPM checklist here.
Any other questions on gap funding or investing in a volatile market? Send us an email at Info@HardMoneyMike.com.