This is a good point. [BTW-You might benefit from the lender’s workshop if you continue to use banks.]
On the use of private money (which is mostly what I use), it’s great to start with friends and relatives and associates who can lend small amounts of money. Establish an excellent payment history, offer good yields and then keep going back to ask for more. I’ve found that mobile homes were a great way to use small amounts of money- like $1000 here, $2000 there. It allowed me to get a MH, and to establish a great payment history with my lender.
Hopefully they will get to the point where each time you need money you just call and say “do you have $100K I can borrow tomorrow?” and they’ll say yes if they have it, because they already know you are a good risk.
Tell everyone what you do- I got money from some very unexpected places, including some vendors I used- locksmith, repairmen, etc.
If you do rehabs, you know the importance and power of paying bills on time- so few people do you will really stand out. Again, these vendors can be good sources of funds.
I started buying foreclosures a couple of years ago. Borrowed against one to get another. Currently have 10 rentals, 5 rent to own, 4 houses being rehabbed for sale, 2 ready and listed for sale, and am closing on a custom home and a spec new construction we built. I also bought 14 vacant lots to build new houses. I have borrowed against all properties to fund this RE business as well as 3 zero interest credit cards.
What I want to tell the beginners is to have a good banker and it wouldn’t help to find individual backers.
My problem right now is that I am asset rich and cash poor. I relied on a local bank and they gave me lines of credit at just enough for me to buy but not to fix up. What I am needing on now is a group of individuals that will finance the finished houses til they sell.
For example, we have a house listed for $135,000 that the bank loaned me $84,000. Another listed at $49,900 that the bank loaned me $16,000. Another that we are selling for $60,000 that the bank loaned me $27,300. I have $100,000 invested in 14 building lots that the bank has loaned me $59,000. Get the picture.
All my $ issues will clear up as my houses sell, but today is somewhat testy.
The moral of the story, Jump right in(it is a great business), swim very fast(get properties ready fast), and have a life preserver($ from backers).