Avenues For Funding Your REI Deals Without Using Banks

Joe Fairless

March 7, 2023

Joe Fairless Cincinnati

While conventional financing can be difficult, there are plenty of other avenues for funding your REI deals. These can be a great option for investors who want to increase their portfolio and don’t have access to traditional bank financing. In this article, we’ll explore some of these options and how to make the most of them. Whether you’re a beginner or an experienced investor, there’s something here for you!

Hard Money Lending

Hard money lenders offer short-term financing, often for purchasing a property or until a buyer secures a traditional loan. These loans are popular with real estate investors who buy homes needing repairs, fix them, and sell them for a profit.

Another great advantage to using a hard money lender is that they typically qualify you based on the property’s value rather than relying on your credit history or income. This makes the approval process much faster.

The best way to find a good hard money lender is to network with other investors in your area. Many lenders attend local REIA or meetup meetings and may be willing to speak with you about their lending policies.

Bridge Loans

If you’re selling your current home and buying another one simultaneously, you can use bridge loans to help finance both transactions. These short-term mortgages can be helpful if you have sizable equity and sound finances, but they can also complicate the process.

Businesses can also use bridge loans to help cover expenses as they wait for long-term financing. For example, a business may be in the middle of a round of equity financing and need money to cover payroll, rent, utilities, inventory, and other expenses.

Getting a bridge loan can be difficult because you must have strong credit and stable finances. But if you’re prepared to take the risk, it could be a great way to smooth the transition between your two houses.

Private Lending

Financing is important whether buying, starting, or investing in real estate. Most people will turn to banks and other conventional lenders, but private lending is also a viable option for some.

These loans are typically more flexible and have lower requirements than traditional loans from big banks or credit unions. They may also be approved quicker, making them a good choice for business owners who need funds quickly.

If you’re considering getting a loan from a private lender, doing some research first is a good idea. Find out their process, how they will work with you, and what kinds of fees they charge. This will help you decide if they’re the right fit for you.

Rehab/BRRRR Loans

If you’re looking for an alternative avenue for funding your REI deals without using banks, consider investing in rehab/BRRRR loans. This strategy involves finding cheap properties, flipping them into rental homes, refinancing them to pay off the original loan, and freeing up cash for another investment.

To avoid losing money on the BRRRR strategy, make sure your purchase price covers all the repair and holding costs associated with the property. Also, calculate your property’s ARV (after-repair value) to ensure that you’re operating at 70% margins.

Remembering that the BRRRR process takes time is important, so you must be patient and ready to do the work required to find and renovate a property. Additionally, you’ll want to get your finances in order and have sufficient cash for the initial purchase and rehab costs.