Here are 4 ways to get fast cash for your next real estate deal! In fact, you could probably employ one or more of these ideas right away, but make sure you use them for GOOD investment opportunities as opposed to recklessly spending on personal items!
Good Debt vs Bad Debt
There’s a big difference between good debt and bad debt. And I’m a big fan of good debt. Most people run into debt problems when they squander their money on personal items. I have a video called Personal Finance Advice You’ll Hear Nowhere Else. In it I encourage you to be aggressive with business expenditures, but then be conservative with personal ones.
I also have another teaching on this subject called “Why Pay Off Student Loans Early?” where I explain why it’s better to take the money you were going to use to pay off your student loan early and invest it in high return on investment endeavors like real estate investing. My focus is using debt reasonably and responsibly for money making endeavors that can bring you bigger returns. Remember, we don’t get fast cash for things that are unproductive, just productive deals.
4 Ways to Get Fast Cash for Good Deals
#1. Borrow from Your Solo 401K
Most 401k plans let you borrow from them and this is my favorite way to get fast cash because you’re borrowing from yourself and paying yourself back interest. The Solo401k is great and permits you to borrow up to $50,000 of your own money. If your current 401k doesn’t allow borrowing, you can contact your 401k administrator and ask to roll it over into a retirement plan that permits you to borrow money, especially if your employer is matching your retirement. I’m a huge fan of the Solo 401k retirement plan and have a video you can watch called The Power of the Solo 401K that gives more detail. Be sure to take full advantage of this powerful tool because it’s free money.
#2. Lines of Credit
The line of credit most people are familiar with is a Home Equity Line of Credit (HELOC). This is a line of credit that allows you to borrow against the equity in your home. I have a HELOC against my own home and approximately every two years I increase it as the value goes up. I use this for funding deals because interest rates are low. The money goes out and comes back in a few months later.
However, some people can’t get these loans because they don’t have enough equity in their home or they don’t have good enough credit. And obviously if you don’t own a house you can‘t get a HELOC loan. So, what do you do if you don’t qualify for a HELOC? Well, there are two other possible options.
Business Line of Credit:
If you set up an LLC and have been successfully flipping houses for a couple years, you may qualify to establish a business line of credit. This is credit against your business and as you use it, you can begin to build it up, increasing your borrowing ability.
Many of my apprentices have set up business lines of credit after graduating. They’re making hundreds of thousands of dollars a year and they can get a line of credit against that business. It’s convenient and they don’t have to use the money, but it’s there if they need it.
Personal Line of Credit:
If you haven’t set up an LLC or you are just a beginner, you can do what I did when I was first getting started. I applied for a personal line of credit and got a $7,000 personal line of credit at a local bank. It was a godsend and I used that to pay sellers to move out and cover a contractor before the closing. I don’t know that a lot of the larger banks offer them, but some of the smaller banks do.
#3. Credit Cards
There are lots of little tips to share with you on this type of credit. The first consideration with credit cards is they have higher interest rates, so you do have to be responsible with them.
Personal Credit Card:
You probably already have a personal card and one of the benefits of moving your personal expenses through it is that you can get rewards points. It’s like free money so go for it if you can pay it off. I personally have a Citi Double Cash. It gives 2% cashback on every purchase; 1% when you spend and 1% when you pay it off. I pay it off at the end of each month and that really adds up over time.
Business Credit Card:
I think business credit cards are great and I’m shocked by how many real estate investors don’t have one. With a business credit card, you still get the benefit of reward points, but it doesn’t affect your credit report. Obviously this can be helpful in all kinds of ways. So, if you don’t already have a business credit card, I encourage you to get one.
Quick Tip: Request an increase in your availability from your provider. You don’t have to use it but gives you quick access to more capital.
#4. Other Credit Sources
This is an option that is popular these days. There is a lot to say on this topic but my experience is limited so I’m not going to go into it. There are a lot of providers with different terms and specific niches.
I’ve talk to people that have had been using the PayPal small loan. They say it’s very convenient and easy to get.
Quick Link: Want Money for Real Estate? Learn more about how to get money for a real estate purchase using hard money loans and creative financing.