How we plan to leverage other people's money

We understand that investing in real estate is a gamble

, so we are going to try and gamble with other people's money as much as possible. This is referred to as leveraging other people's money. An example of this is: you buy a house with 5% down and finance the rest of the purchase price. The 5% down payment is your investment (plus closing and holding costs). This means that you will have to contribute around $5,000 for a $100,000 investment. See where this is going? Good financing is imperative to the success of our company.

We can go a couple of different routes with financing for our investment houses. Most banks offer non owner occupied loan programs, but they take too long to close and make you jump through too many hoops in most cases. When we buy a property that we are going to hold and rent out, then this is one of the programs we will use.

This leaves Home Equity Loans and hard money loans. We are pursuing a heloc on our primary residence, but the lenders require that we have owned it for a minimum of 6 months (this will happen April '06). In Las Vegas the median house price is around $325,000 currently, so our heloc will not cover the purchase of a property.

Our financial plan for the majority of our flips is to buy the property with a hard money loan. We will then use our heloc to cover closing costs, holding costs and repairs. Remember that we are focused on rehabbing or flipping properties, not rentals.

Click here to see FAQ's on how we buy houses.