---- Your option at this time are:-----#1. Engage with an affiliate who has access to money. -------#2. Engage a joint venture (JV) with someone who as access to momey. #3. Engage a private lender on a PROFIT sharing basis. #4. THIS IS IMPORTANT ---- Create your own private lending sources. You do this by helping others solve their money issues..(low returns). ----------#2 is your most likely road to success.
I have used hard money lenders many times. A hard money loan (or private loan) may be possible in your situation. Depends upon how much credit and collateral you have.
If you're short on either, you may want to consider a cash or credit partner depending on which you need. If you need help convincing someone to fund your deal, consider adding someone to your team who has VERIFIABLE experience renovating homes. Not only will they help smooth the process when it comes to renovating, hiring and monitoring contractors, etc., but they will make your lender or cash partner or credit partner much more comfortable and willing to pull the trigger when it comes to funding.
Don't be afraid to give up some of the profit for a cash partner, credit partner and/or project/construction manager. The experience you gain will be invaluable as will be the credibility you begin to build with the private/hard money lender. If they're impressed with your first transaction, they're much more likely to do a second, third, etc.
One option is using a cash partner for down payment and working capital during the rehab in conjunction with a hard money lender. Yes, I said "working capital." You will need money during the project for mortgage payment, materials until the next draw, utility bills, permits if required, etc.
By the way, take before, during and after pictures of each project so you can build a portfolio of your track record. It's a lot easier for someone to make a funding decision when you show them you have experience as a rehabber.
Note that every hard money lender is different. Some will call themselves hard money lenders yet still ask for all the documentation required by a regular bank. To me they're asking for all the rewards (high points and interest rate) while taking away the convenience and speed of hard money.
These days, many hard money lenders ask for credit report, tax returns and an appraisal. Most will lend between 65% and 70% of THEIR appraisal number, which can be 5%-10% lower than the market.
They may or may not ask for money down, depending on the situation. The lower your combined purchase and renovation costs in relation to their appraisal, the better.
One issue you may encounter as a full-time employee is that lenders will ask how you'll be able to manage the project. I think you will need to work with an experienced construction guy, possibly a retired contractor looking for extra income, who can be your eyes and ears during the day while you're working your 9 to 5.
I personally make a distinction between hard money lenders and private lenders. To me, a true private lender is a friend, family member or associate investing in the deal mainly due to their belief in you. No credit report. No tax returns. And probably no appraisal (assuming you've shown them settled properties in the neighborhood and other evidence that the numbers work). These relationships can be built over time.
Look into self-directed IRA's. Money placed in a self-directed IRA can be lent privately. Someone you know may want to make higher, TAX-FREE returns by doing this. Only thing is that I'm fairly certain it can't be an immediate family member.
Regarding finding a property, there are opportunities to buy distressed properties if you look. Bank-owned properties thru Realtors are tougher as the MLS is a convenient hunting ground for many rehabbers and their agents. Private deals are available through wholesalers who spend the bulk of their time looking for properties.
Regarding the rehab, surprises are inevitable, but that's why all builders and developers include a line in their budget labeled, "Contingency," running anywhere between 5% and 10% of the budget total. That being said, you do need to be wary of structural issues and, in the suburbs, well or septic issues. Despite the media hype, lead paint, radon, asbestos and mold are all very manageable without a HAZMAT team.
I've looked at hundreds of homes. Only a handful have had dealbreaking structural issues. In the burbs, you need to worry about well and septic. Include contingencies in your offer for these. Fixing a well can be costly, if the water is drinkable to start. Most costly, however, is a new septic system--$15,000 to $40,000 or more depending upon how well the land "percs."
I've included a link below to a good hard money lender. Give them a call and, most importantly, don't give up! There are no problems, only solutions, and there's a deal out there with your name on it. Surround yourself with experienced positive thinkers willing to offer advice and constructive criticism FROM EXPERIENCE. Ignore the innumerable people who don't have any advice other than to say it can't be done. Do your research. Get your ducks in a row. And go for it!
P.S. Start attending local investor meetings, and don't be afraid to ask questions. Lots of people willing to help.
A hard money loan is also called an Equity Loan. You need to have either a large down payment or buy so well below the market value that you would have equity even without your improvements. This is very difficult to do.
There is no short cut to success here. Start by establishing credit and having a down payment. Your plan won't impress too many lenders unless you have established a history of doing what you're intending to do.
It may take a friend or family member who believes in you to get your first project going. You would be learning something that more people fail at than succeed at the risk of their money. Don't believe the late night infomercials and radio advertisements. Some flippers who've been on TV ended up Bankrupt. Every "fixer" house has some surprises and expenses that the most experienced people miss.
The people I know who have had some success were either established agents who were very handy and know the market or contractors who have been repairing and building houses for years. Both have experience as well as money and credit going for themselves, and even then not all their projects are successes.