Smart Financing Strategies for Real Estate Investors: Unlocking Capital for Growth

For real estate investors like yourself, there are multiple options to access capital for future deals or liquidity. Let’s compare several common strategies to get money after an investment, their pros and cons, and which one might work best depending on your financial goals.

1. Cash-Out Refinancing

  • What It Is: This allows you to refinance your existing mortgage, taking out a new loan that is larger than your previous loan. The difference comes to you in cash.
  • Pros:
    • Provides a lump sum to invest in new deals.
    • Interest rates may be lower than other loan types.
    • Potential tax advantages since mortgage interest is often deductible.
  • Cons:
    • You’re increasing your debt, which could increase the overall interest paid.
    • If interest rates have risen, you could end up paying more in the long term.
    • May reduce your cash flow due to higher monthly payments.

Best For: Long-term investors who want to hold onto properties but need capital for other deals.

2. Home Equity Line of Credit (HELOC)

  • What It Is: A HELOC allows you to borrow against the equity in your property, but unlike a refinance, you only borrow what you need, and only pay interest on that amount.
  • Pros:
    • Flexible access to funds.
    • Interest rates are often lower than personal loans or credit cards.
    • You only pay interest on what you use, not the entire line of credit.
  • Cons:
    • Variable interest rates mean payments can increase.
    • The home is used as collateral, which could be risky.

Best For: Investors who need flexible, revolving access to cash and are comfortable with fluctuating interest rates.

3. Bridge Loans

  • What It Is: Short-term loans designed to “bridge” the gap between buying a new property and selling an old one. Typically used to buy a property quickly without waiting for financing.
  • Pros:
    • Fast approval and funding.
    • Allows investors to act quickly on opportunities.
    • Can help avoid missing out on a deal while waiting for other funds.
  • Cons:
    • Higher interest rates and fees than traditional loans.
    • Short repayment period (usually 6–12 months), which can add pressure to sell or refinance quickly.

Best For: Short-term investors or those looking to acquire property quickly.

4. Hard Money Loans

  • What It Is: Hard money lenders provide short-term, asset-based loans secured by real estate.
  • Pros:
    • Quick access to capital.
    • More flexible terms compared to traditional lenders.
    • Good for flipping properties or short-term holds.
  • Cons:
    • Very high interest rates.
    • Fees can be expensive (points, origination fees, etc.).
    • Typically, shorter terms (1–3 years) with a balloon payment at the end.

Best For: Investors who are looking to flip properties or are comfortable with higher costs in exchange for fast, flexible funding.

5. Private Money Loans

  • What It Is: Loans from private individuals or institutions that are not traditional lenders.
  • Pros:
    • More flexibility in terms and conditions.
    • May offer lower interest rates than hard money lenders.
    • Faster than traditional loans, and fewer qualification requirements.
  • Cons:
    • Interest rates can vary widely depending on the deal.
    • Relationships with private lenders can be hard to build and maintain.

Best For: Investors with strong networks who can leverage personal relationships for financing.

6. Kiavi (Formerly LendingHome)

  • What It Is: A lender that specializes in short-term real estate investor loans, such as fix-and-flip or rental property loans.
  • Pros:
    • Fast loan approval and funding.
    • Competitive rates for short-term loans.
    • Tailored for real estate investors with specialized loan products.
  • Cons:
    • Limited loan options compared to traditional banks.
    • Typically for short-term loans, which may not suit all long-term investors.

Best For: Real estate investors who want a lender that understands their needs and offers quick access to capital for flipping or buy-and-hold rental strategies. Click here to get details

7. Portfolio Loans

  • What It Is: Loans that are kept by the lender (often small banks or credit unions) in their own portfolio rather than sold to investors.
  • Pros:
    • More flexible underwriting standards.
    • Great for investors with multiple properties or unique situations.
    • Can finance non-traditional properties.
  • Cons:
    • May come with higher rates or fees due to the flexibility.
    • Limited availability as not all lenders offer these products.

Best For: Investors with large property portfolios or unusual property types.


Strategies to Make Money in Real Estate

  1. BRRRR Strategy (Buy, Rehab, Rent, Refinance, Repeat):
    • How It Works: You buy a distressed property, renovate it, rent it out, refinance to pull out cash, and repeat the process. This strategy maximizes your returns and keeps your money moving.
    • Pros: Allows you to recycle your capital for multiple deals.
    • Cons: Requires good knowledge of property rehab and market conditions.
  2. Fix-and-Flip:
    • How It Works: Buy a property, renovate it, and sell for a profit.
    • Pros: Quick turnaround and potential for high profits.
    • Cons: Market volatility, high rehab costs, and potential for delays.
  3. Rental Properties (Cash Flow Strategy):
    • How It Works: Buy a property, rent it out, and generate passive income through monthly rental payments.
    • Pros: Long-term wealth building and passive income.
    • Cons: Requires property management, tenant risk, and maintenance costs.
  4. Real Estate Syndication:
    • How It Works: You pool money with other investors to buy larger properties or developments. You can be a passive investor or an active partner.
    • Pros: Access to larger deals with limited personal capital.
    • Cons: Less control if you’re a passive investor, potential for lower returns depending on the deal structure.

Which is Best?

The best option depends on your investment strategy, time horizon, and risk tolerance:

  • If you need quick access to funds and can handle higher interest: Hard Money or Private Loans.
  • If you want to hold properties long-term and preserve cash flow: Cash-Out Refinance or HELOC.
  • If you are a short-term investor looking to flip or transition between properties: Bridge Loans or Kiavi loans.

Based on your experience with Kiavi and wanting liquidity without waiting too long for your money, a combination of HELOC or a cash-out refinance could work best for long-term investments, while hard money or bridge loans could serve for faster, more aggressive deals.

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Real time case study

In my real estate journey, I’ve learned the power of smart decision-making and leveraging resources effectively. For instance, I initially bought 6 Topaz for $285k using my 401k after a buyer backed out. After investing additional money for renovations, my goal was to sell by July, but the sale didn’t happen. As a backup plan, I refinanced another property, which generates $4k in monthly rent, securing a $400k loan with a $3,500 monthly payment. This allowed me to repay my 401k.

Next, I decided to buy 24 Baker. I planned to use the money from the sale of 6 Topaz for the purchase, but the deal fell through due to unforeseen circumstances. With no room to back out, I took a bridge loan from Kiavi to secure 24 Baker for $260k. After renovations, the total cost will be about $300k, and I plan to rent it for $2,800 per month. My goal is to eventually refinance 24 Baker, get my investment back, and reinvest in future properties.

Through this approach, I’ve built a portfolio of six properties, four of which are fully paid off. The combination of rising rents and increasing property values continues to strengthen my financial position. My key to success? Always think strategically, be prepared for backup plans, and keep reinvesting. I typically start with just a 10% down payment on new investments.

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