37 Actional Strategies For Leveraging Other People’s Money to Start, Grow, or Automate Your Real Estate Investing Business, and Flip Unlimited Properties.

37 Actional Strategies For Leveraging Other People’s Money to Start, Grow, or Automate Your Real Estate Investing Business

(and Flip Unlimited Properties)

by The Kalis Brothers, Dan & Joe

[Click HERE to download the PDF of this report, or continue reading below]

Overview

Massive wealth in all areas of business comes from smart and calculated leverage. But leverage isn’t limited to a financial transaction. The benefits of leverage in real estate come from effectively utilizing Other People’s Money (OPM), but also Other People’s Time/Efforts (OPT) and Other People’s Resources/Knowledge (OPR). This is equally true of moguls like Donald Trump, Bill Gates, and Warren Buffet, even though their business models and empires are vastly different.

Many real estate entrepreneurs fully understand and benefit from leveraging OPM and investing it in the acquisition and construction/rehab of properties (i.e. flipping houses).

But where most fall short is in the realization that they can actually raise capital from sources other than joint venture partners, hard money lenders and private money lenders, and for purposes other than acquisition and rehab.

The following list includes a number of opportunities to leverage OPT and OPR. Most of the items on this list will require an alternative funding source that allows for these uses, as hard money lenders, private lenders, and joint venture partners generally will not allow their funds to be used as general “working capital.”

Working capital is a common term for traditional businesses, from small, to medium, to Fortune 500, and involves funding the day-to-day operations of a business, such as marketing/advertising, supplies, inventory, payroll, overhead, expansion, equipment, vendor payments, and anything else.

Since the typical real estate investor doesn’t have many of these elements in their business, the thought rarely crosses our minds to seek working capital, but rather a limited focus on funding actual deals once they are found, negotiated, and put under contract. But if the opportunity exists to use other people’s money to buy and rehab a house (once you have a deal under contract), why wouldn’t one also exist to use other people’s money to generate the deal in the first place… and to have other people manage the process, freeing up your time to work more ON your business than IN your business?

That’s why we put together this list. To get you thinking of all the opportunities to benefit from leverage, starting even before you have a new lead, and following through until you close on the resale of your flip project, and deposit your huge check.

Some of the resources listed below involve a one-time expense, other’s a recurring investment… some might be less than $100, some could run into the 6-figures. The important consideration is NOT cost, but ROI.

Imagine what your life and business would be like if you could hire a competent acquisitions manager to handle ALL the inbound phone calls generated from all the new marketing campaigns you put together? Or a social media agency? What could you do with an extra $50,000 to $150,000 cash to generate leads and systematize your business, if you already had access to multiple 6-7 figures in private and hard money loans?

This list is not exhaustive, but should help you create a comprehensive business and marketing plan, which includes the profitable use of capital on the front end, middle, and back end of every campaign you develop.

How many of these items would you like to invest in? How soon? How much faster would you hit your income and wealth goals if you could invest in more of them sooner (before you have your own cash).

At the end of this list, we list a few recommendations for sources of capital that you can apply to any or all of the items on this list.

Items in RED are the only things that can be included with hard money and private investor loans
Everything else requires your own cash or a funding source that allows working capital for real estate investors

DEALMAKING

  1. Property Acquisition: Cash
  2. Property Acquisition: Down Payments
  3. Property Acquisition: Earnest Money Deposits
  4. Property Acquisition: Option Deposits
  5. Property Construction: Materials
  6. Property Construction: Labor
  7. Property Construction: Emergency Funds
  8. Property Staging
  9. Real Estate Brokerage Licensing, Memberships, etc.

MARKETING

  1. Direct Mail (Yellow Letters, Postcards, etc.)
  2. Bandit Signs
  3. Website Design/Development
  4. Social Media Advertising
  5. Social Media Management
  6. PR Services
  7. SEO Services
  8. Pay-Per-Click Online Advertising
  9. Print Advertising (newspapers, magazines, etc.)
  10. Outdoor Advertising (Billboards, etc.)
  11. Marketing Automation Tools (Email Autoresponders, etc.)
  12. Promotional/Branding Items (Vehicle Wrap, Apparel, Pens, etc.)

OPERATIONS

  1. Funds To Pay Yourself A Salary For 6-12 Months & Go Full Time
  2. Cash Reserves For Misc. Expenses, Slow Periods And In Between Deals
  3. Outsourcing: Virtual Assistant(s)
  4. Outsourcing: Acquisition Manager(s)
  5. Outsourcing: Disposition/Sales Manager(s)
  6. Outsourcing: Project Manager(s)
  7. Technology Tools (CRM, Productivity, Data/Research, etc.)
  8. Gasoline (Traveling To Visit Properties)
  9. Commercial Office Space & Related Overhead

EDUCATION/TRAINING

  1. Books
  2. Seminars
  3. Online Courses
  4. High End Group Coaching/Memberships
  5. Personal Coaching/Mentorship: Real Estate
  6. Personal Coaching/Mentorship: Selling/Negotiating
  7. Personal Coaching/Mentorship: Marketing

So, the next logical question is: How am I supposed to raise this working capital?

There are generally 5 sources of capital for individual real estate “flip” investors:

1) Cash (your own)

They say “Cash Is King.” It certainly gives you more choices.
Sure, you can do all sorts of creative financing deals on “terms,” such as seller financing, subject-to, lease options, and various combinations of those strategies… IF the seller is open to waiting for a lump sum of money. In this instance, you might offer full price, or close to it, in exchange for getting more TIME (to do repairs, find another buyer, install a tenant, and/or exit with a future sale).
But if you have a big pile of cash, you ALSO have the option of making a deeply discounted offer, getting it accepted, and getting closure on the deal, along with a nice assignment fee or proceeds check.
There are 2 totally different types of funding when it comes to real estate investing. Sadly, most real estate investors only think about and focus on #1:

  1. Deal Funding
  2. Company Funding (also known as Working Capital)

Deal funding involves using someone’s money (yours or Other People’s Money [OPM]) for:

  • Acquisition of properties (including earnest money or option deposits and the actual purchase)
  • Rehabbing of properties (including labor, materials, and miscellaneous related expenses)

Company funding includes everything else, which allows you and your business to:

  • Generate leads (marketing)
  • Cover overhead (operations)
  • Hire employees / outsource tasks (operations)
  • Receive education, training and mentorship
  • Invest in technology, tools and systems

… and many other things, as we have listed in the list and PDF above.

Using your own cash is the “organic” way of funding your company and your deals, and has 2 different forms:

  1. You already had a pile of cash from previous deals, other businesses, inheritance, savings, etc.
  2. You save and reinvest the cash you generate from your current deals (aka Bootstrapping)

Either way, if you’re smart, you can get a tremendous ROI whether it’s $100 of your own cash, or $100,000.

 

YOUR RECOMMENDED RESOURCE

If you have a mere $2.95 of your own cash, we highly recommend you take a look at a powerful and revealing book by our business buddy, Preston Ely, called “How To Get Rich In Real Estate.” It’s a documentation of everything he’s done to quit his job and become a legitimate millionaire real estate investor.

Click here to check that out…

 

2) Joint Venture (equity) Partners (JVPs)

Oftentimes, real estate investors bring in another investor as a “silent partner” who contributes their own funds (Whether their own cash, or cash raised from their own private lenders) in exchange for profit/equity sharing. This is not a loan. For example, Investor B contributes $200,000 for the acquisition and construction of a deal Investor A got under contract, in exchange for 50% of the profit. After the home is resold, the two investors split a $40,000 profit — $20,000 each, after Investor B is paid back his principal $200,000 at closing.

First off, a joint venture partnership in real estate investing typically involves one investor who finds/secures a deal (under contract), along with a second investor who contributes their own cash (whether from their own bank account or their own private money lenders). But, instead of Investor B charging Investor A interest and points to use their money (a loan), they are equity partners on that particular deal, and split the proceeds (50/50, 60/40, or whatever they agree to).
When you raise capital from private investors, the structure is generally in one of two formats:

  1. Debt (e.g. Private Money Lender or Hard Money Lender. We’ll cover in future emails)
  2. Equity (e.g. Joint Venture Partner, as discussed in this email)

Joint venture partnerships are one of the BEST ways to leverage Other People’s Money.

Why?

Because there is virtually no financial risk to you. Unlike debt based leverage, which involves some type of guarantee on your part (personal, property as collateral, etc.) to service periodic payments of a loan or other extension of credit, if the deal goes south and loses money, you have no loan to default on, nor any cash of your own to lose.
However, there IS a significant relationship and reputation risk, if you are unprepared, sloppy, incompetent or unethical. If something you did (or didn’t do) causes the deal to go sideways, your joint venture (equity/funding) partner may choose to:

  • Not do business with you again
  • Warn others about doing business with you
  • Sue you
  • Anything else that their imagination comes up with

So, the key elements to pulling off strong, profitable, and long term joint venture partnerships are:

  1. Good communication (transparency, responsiveness, and setting proper expectations)
  2. Relationship-building (making a personal connection and developing a fondness for your partners)
  3. Integrity (if this isn’t self-explanatory, please don’t be in business, in general)
  4. Networking (ability to meet and engage with new, interesting, knowledgeable and resourceful people)
  5. Competence and skill (primary at marketing, as a more experienced JVP may be willing to help analyze and structure deals)

If JVPs are a funding sources you’d like to tap into, it’s very important for you to invest significant time and money into developing those elements. Most metro areas have at least one real estate investment club/association or real estate investing Meetup group, and of course there are many such forums/groups online.

This source of cash can typically be used  for Property Acquisitions and Construction only.
YOUR RECOMMENDED RESOURCE

In light of those 5 key elements above, there isn’t a more relevant resource available to you right now than a private membership called, “Real Estate Mogul ELITE” (another one by our pal, Preston Ely).

 

3) Lines Of Credit

Secured:

The first type of credit line is one secured against a piece of collateral, typically real estate property. Most banks will issue a “Home Equity Line of Credit” (HELOC) on primary (owner occupied) residences, up to a certain Loan-to-Value (LTV), but not as easily on investment (non-owner occupied). The funds from these loans can often be used for any purpose, but utilization for speculative business purposes could put your home and family at risk, so proceed with diligent care and caution. Typically, the rates and fees on HELOCs are very low.

Unsecured:

There are only a few companies that offer the service of helping investors and entrepreneurs acquire multiple lines of unsecured credit (both commercial and personal), which can be converted to cash through a careful and strategic process (in order to avoid large cash advance fees). Depending on personal credit rating (generally 680+ or with a co-signer), borrowers can often access $50,000 to $150,000 on a stated income basis, with no collateral, within 2-3 weeks.

We were personally able to acquire $120,000 from a company called Funding For Flipping, despite being rejected by another company that charges way more than them.

If you are interested in raising cash that can be used for any purpose, at a cost that is lower than hard money and JVPs, we highly recommend requesting information and a phone consultation from them by clicking HERE.

Because this source of cash is not secured against property, funds can be used for any purpose.

4) Hard Money Lenders

A short-term bridge loan from an “asset-based lender.” Hard money loans are backed by the value of the property, not by the creditworthiness of the borrower. Since the property itself is used as the only protection against default by the borrower, hard money loans have lower loan-to-value (LTV) ratios than traditional loans, with higher rates and upfront points. Although expensive (12-18% interest + 2-10 points per deal), many investors have created huge wealth by using hard money loans.

This source of cash can typically be used  for Property Acquisitions and Construction only.

5) Private Money Lenders

Also a short-term bridge loan, many savvy real estate investors raise capital from wealthy individuals and organizations by offering them a rate of return significantly higher than most “secure” bank programs offer, along with the security of a lien on the subject property. Depending on your networking and sales skills, reputation, and financial aptitude, this can be an unlimited source of cash, typically between 8-12% APR. In almost every case, for many reasons, private investor loans are a better option than hard money loans.

This source of cash can typically be used  for Property Acquisitions and Construction only.

Click here for a powerful training on how to raise enough private capital for all your deals.

6) Institutional Investors (hedge funds, etc.)

Billions of dollars from institutional Wall Street investors are being dumped into single family homes on Main Street every day, but the good news is that it’s up for grabs by individual investors like us. This is more of a reverse wholesaling funding strategy, but nonetheless, if you are able to build relationships with asset and acquisition managers at these firms, you can become their “personal shopper” for properties in your neighborhood with their cash. The best part? Since they are notorious for grossly overpaying on deals at levels that would make you cringe, you can be the one they are overpaying on a wholesale spread, and carve out an unlimited number of 5- and 6-figure assignment fees.

Click here for a killer training on how to tap into this multi-billion dollar purse.

Summary

    • All wealthy entrepreneurs use some type of leverage to yield their astronomical results
    • Leverage can come from Other People’s: Money, Time, Efforts, Resources or Knowledge
    • With Other People’s Money, there are multiple SOURCES of funding — some for working capital, some for deals
    • Working capital allows you to borrow at X, and yield 3X, 5X, or even 20X and more from marketing and outsourcing
    • Deal funding allows you to control a property while enhancing its value and securing an end buyer
    • We’ve provided you with special resources for the following types of funding, should you need them:

We hope this information and list of resources helps you achieve your goals of wealth and freedom!